China Yunnan’s planned power cuts lead to yellow phosphorus price rise, resulting in record high glyphosate price

According to a notification on 10th May, China Yunnan power grid initiated planned power cuts on prime electricity customers by 10% to 30%, due to a shortage of produced power resulting from the inadequate levels of major reservoirs in Yunnan. Affected by power cuts in Yunnan, the price of yellow phosphorus jumped up sharply in the past few days.

Yunnan, Guizhou and Sichuan are the main provinces producing yellow phosphorus in China. In 2020, the yellow phosphorus production capacity of the three provinces accounted for 42%, 14% and 21%, respectively, of China’s total. The production capacity for yellow phosphorus productions in Yunnan Province has decreased for reasons of operations regulation, technical upgrading and peak load power cuts, further restricting the supply of yellow phosphorus. Last week, the production output of yellow phosphorus fell by 20.5%, with the inventory declining significantly. Affected by this short supply, the price of yellow phosphorus rose sharply during the week.

Over the last a couple of days, the power supply shortage in Yunnan has not eased up, but has further deteriorated. More yellow phosphorus plants have been out of service, stocks have decreased, and some manufacturers have suspended making quotations. Analysis suggests that the planned power cuts may continue until mid-June, so the price of yellow phosphorus is expected to continue rising in the short-term.

At present, the production load of yellow phosphorus manufacturers in Yunnan, Guizhou and Sichuan is 15.9%, 38.5% and 68.5% respectively, whilst the production load in Yunnan has been significantly lower than at the start of the month. Since the power consumption production of yellow phosphorus is about 15,000 KWH per ton, the electricity tariff significantly affects cost of production. Hydropower is the main source of power in Southwest China, where its cost is low during the high-water season from June to September. At that time, production will continue and the supply of yellow phosphorus will increase seasonally.

Prices of glyphosate, downstream of yellow phosphorus, hit record highs 

Yellow phosphorus is widely used in the synthetic detergents, pesticides and defense and military industries. In 2020, glyphosate accounted for 26% of demand from the downstream of yellow phosphorus.

Recently, the price of glyphosate has hit a record high. Beginning from Yuan20,000 per ton in May last year, the latest average price rose to nearly Yuan40,000 per ton, an increase of over 90% year-on-year. Yellow phosphorus accounts for about 20% of the cost of glyphosate, and it is expected that the increase in the price of yellow phosphorus will drive the price of glyphosate higher.

This year, the prices of chemical materials, such as methanol, yellow phosphorus and liquid ammonia, generally rose sharply, backing up the price of pesticide technicals. From the supply side, the capacity of glyphosate has decreased in recent years from some 1 million tons in 2015 to about 750,000 tons. From the demand side, the first and second quarters are the peak seasons for pesticide applications when shortages of supply often occur, resulting in a continuous price rise.

In addition, according to media reports, the downstream glyphosate price has continued to rise to accommodate the high price of yellow phosphorus, playing a key role in the latter’s price rise.

With regards to yellow phosphorus, the Xingfa Group has a capacity of 160,000 tons, and its production output was 114,000 tons in 2020. In 2020, Yunnan Yuntianhua Co., Ltd. exploited 1.366 million tons of yellow phosphorus ore and produced 32,000 tons of yellow phosphorus.

Concerning glyphosate, the total capacity of Xingfa Group is 180,000 tons, while Jiangshan can produce around 220,000 tons after the acquisition of Fuhua. Wynca produces about 80,000 tons of glyphosate technical annually, and Yangnong is said to have an annual capacity of 30,000 tons.