China’s yellow phosphorus prices running high, phosphoric acid prices rising at higher rate than yellow phosphorus

Date:09-23-2022

The price of China’s phosphoric acid again exceeded RMB10,000 per ton. As of September 19, the average price of mainstream phosphoric acid based on the furnace process in China was RMB10,320 per ton, with the highest price reaching RMB11,000 per ton. The highest price of phosphoric acid based on the wet process also exceeded RMB10,000 per ton, while the lowest price was RMB9,600 per ton. Over the past few days, the price of phosphoric acid increased at a higher rate than the price of yellow phosphorus, due to raw materials being stocked by downstream manufacturers, as well as manufacturer’s predictions that the price of yellow phosphorus will continue to rise, resulting in the prior price rise of phosphoric acid to cover expected cost pressures.

Industry insiders said that after the Mid-Autumn Festival, the price rise of yellow phosphorus downstream products, phosphoric acid, and phosphorus trichloride exceeded the price rise of yellow phosphorus. The main reason is the fact that phosphoric acid and phosphorus trichloride manufacturers expect the continued price rise of yellow phosphorus soon. To ensure profitability, phosphoric acid and phosphorus trichloride manufacturers have decided to increase their prices at a higher rate to cover the cost pressures from the expected future price rises of yellow phosphorus. 

The price of yellow phosphorus fell sharply in July this year, mainly due to low electricity tariffs during the flood season and the ongoing high loads facing manufacturers while downstream demand was low, which led to a sharp decline in the price of phosphoric acid. After mid-August, due to power cuts and production restrictions in the Sichuan production area, the supply of yellow phosphorus fell sharply while its price rebounded rapidly, rising by over 30% in half a month. 

However, compared to yellow phosphorus, the price of phosphoric acid has rebounded rather slowly. Because of the intense summer heat in August, at the downstream stage of phosphoric acid, fertilizer, phosphating liquid and oxidation industry sectors were shut down due to high temperatures for maintenance, during which demand for raw materials was stable. However, after the Mid-Autumn Festival, the demand for stocks of raw materials from downstream manufacturers had surged, leading to the short supply of phosphoric acid.

Data showed that by last week, domestic furnace process-based phosphoric acid production was 45.13%, an increase of 1.4% over the previous week while wet process-based phosphoric acid production was 79.73%. In the event of a supply increase, a rise both in sales volume and price may happen in the phosphoric acid industry sector.

Nevertheless, due to its close relationship with yellow phosphorus, the price of phosphoric acid may be stifled again by yellow phosphorus after October. Analysts point out that the current round of price rises of yellow phosphorus had been very evident, highlighting an increase in both price and sales volume. As of last week, yellow phosphorus production reached 66%, which is another incidence of high load this year. 

Under such a production load, yellow phosphorus manufacturers recently refrained themselves from selling and have tried to push up the price of yellow phosphorus. However, as the National Day holiday is drawing near, yellow phosphorus production will face greater environmental compliance regulations and logistic pressures. Once sales become difficult, the pressure on the yellow phosphorus inventory will increase. Therefore, manufacturers will have to de-stock yellow phosphorus and the price may fall, which could again encumber the price of phosphoric acid.