China’s Yellow Phosphorus Offers Soared Amid Supply-Demand Imbalance

In the last week of February, the Yellow Phosphorus in the Chinese domestic market observed an enormous surge of 7% on a week-on-week basis, due to the contradiction in the supply-demand outlook in the domestic market. This market development came as a long-term impact of the ‘dual control on energy consumption policy’ imposed by the Chinese authorities to curb carbon emission during the third quarter of 2021. Therefore, in response, it intensified the uptrend in the producer's quotations of Yellow Phosphorus in the Chinese domestic market.

Currently, the demand outlook of the Yellow Phosphorus observed a significant boost as the market sentiments rebounded after a weeklong Lunar New Year holiday’s in China. The supply outlook further worsened the situation, as the inventories levels were running low despite the lower operational rates at the production facilities in China. Yunnan province in China has an important position in the production of Yellow Phosphorus, with a cumulative production capacity of 550,000 tonnes besides accounting for a 41.52% of the country’s total production capacity. The guidelines provided by the Chinese authorities in 2021, directed to maintain the average output for upcoming months below the 10% of the production line output in August, which further coupled with the power rationing in China. As a ripple effect, the prices of Yellow Phosphorus skyrocketed during Q4 2021.      

Whereas, the major downstream sector for Yellow Phosphorus is Phosphorus trichloride, Glyphosate, thermal Phosphoric Acid, etc. In recent times, the rapid development of the new energy sector towards a greener economy supported its demand in the manufacturing of Lithium Iron Phosphate and Lithium Hexafluorophosphate, it also emerging as a major segment in the Yellow Phosphorus market.

As per ChemAnalyst, “It is anticipated that the ongoing shift in the market dynamics and geopolitical turmoil in the Eastern European region further widen the supply-demand gap in the Chinese domestic market and the offers will soar further in the upcoming period.”