Downstream enterprises beginning pre-holiday replenishment, yellow phosphorus price continues to go high

Last week, the yellow phosphorus price continues to go up at a rise of RMB3,000-4,000 per ton, which is quite a significant increase. At the beginning of the week, the price of yellow phosphorus was quoted by manufacturers at a rise of RMB2,000 RMB per ton, whilst the transaction price continued to rise. On the 8th December, yellow phosphorus manufacturers quoted another rise of RMB2,000 RMB per ton, the transaction price continued to follow the price rise. As downstream enterprises have kicked off replenishment, which have led to start of considerable amount of procurement, the yellow phosphorus market has become tight. Additionally, as manufacturers are unwilling to sell, the yellow phosphorus price continues to rise to a new high.

The continued price rise of yellow phosphorus is backed up by the following factors:

1. Downstream enterprises kicking off replenishment before the new year holiday, the overall market appears promising. 

After the yellow phosphorus price begins to rise, the market demand for phosphorus trichloride and phosphoric acid has increased, which are being sold very well. Hence, the production and procurement have both been improved. At the same time, taking into account China’s forthcoming Spring Festival Holiday and the expectation of a continued price rise of yellow phosphorus, downstream enterprises have started to make replenishment of yellow phosphorus. In this circumstance, procurement has continued to grow, resulting in tight supply of yellow phosphorus and a price increases as well. 

2. New electricity tariff to be implemented in Yunnan from January 

In January, Yunnan Province will begin implementation of the new electricity tariff for 2022. Under the new electricity tariff policy, Yunnan’s electricity tariff in 2022 will be higher than that of 2021, which will lead to higher cost of production of yellow phosphorus. Because of the new electricity tariff, yellow phosphorus productions may be affected, some manufacturers will consider off-peak running of productions. 

3. Yellow phosphorus manufacturers unwilling to sell

Yellow phosphorus manufacturers appear unwilling to sell, some of the larger enterprises have no intention for export at lower price. Also, there have been plenty of purchase orders received some time ago, which require manufacturer’s concentrated effort to make delivery. So, manufacturers are not in a good position to take new orders. In this situation, the market becomes tight, which continues to back up the higher price of yellow phosphorus.

4. Central government’s environmental compliance inspection team stationed in Guizhou

A central government’s environmental compliance inspection team has been stationed in Guizhou Province from December 5, until January 5, for a month-long environmental compliance inspection. The industry has shown great concerns about the inspection, which will affect the running of yellow phosphorus productions in Guizhou and may result in a price rise. This is one of the reasons for start of procurement by some enterprises to make replenishment. 

In general, the yellow phosphorus market afterwards is backed up by the pre-holiday replenishment demand from downstream enterprises, which bring about adequate purchase orders. The overall market will remain tight and yellow phosphorus price will stay at an upward trend. The price of yellow phosphorus is expected to rise to RMB43,000-45,000 per ton in December.