Diammonium: Destocking and Decoupling

In game theory, there is a smart pig game. It is said that one pig and two pigs must have a head to run the feed switch to eat food in the trough, but each feed is not enough to feed the two pigs. It takes energy to run the switch. Assuming each pig is rational (maximizing its own benefits), the final game result is that each time the pigs run to the switch. In industries where the market share of some enterprises is high but there is no monopoly, this model has very good guiding significance for analyzing the trend of market prices.

This model accurately predicted the trend of potash fertilizer in 2009: Some companies with higher market share slam prices, while small companies took the opportunity to take the goods, causing a potash crash. This year's scene will be staged on the product of diammonium phosphate: China's total output of diammonium is approximately 18 million tons, and the total capacity of the top five companies is approximately 13 million tons. If China’s total domestic consumption and exports amount to 12 million tons, and the top five largest companies form price alliances to maintain price stability, the survival space of SMEs will not be compressed, and they will use low-cost strategies. To maintain full-capacity production, the market share left by large companies is only 7 million tons, and the operating rate of large enterprises must be reduced to about 50%. In the absence of production, the price consortium eventually brought huge decompression pressure to large companies and led to the bankruptcy of price alliances. This can be seen in the trend of diammonium prices: through large enterprise alliances, domestic diammonium prices Before and after the export window period on May 15 was very stable, the FOB price remained at around US$505/ton, but by July 12, it had fallen to about FOB460/ton. Domestic prices have also dropped simultaneously. At this point, the domestic diammonium price coalition has been completely broken. Big companies are experiencing the pain of destocking. There is a huge loss in port and factory inventory (loss in price may be as high as 500 yuan/ton).

The key to solving the dilemma of diammonium is to eliminate the "pigs" because if there are more "pigs", even if the "big pigs" are hardworking, they may not even have a mouthful.

Here we have to put forward the effect of the mouth policy on diammonium: The export tariff of diammonium has been reduced this year, and the export window period has also been extended, but diammonium fell when the export window period arrived. This shows that policies do not bring real benefits, but instead interfere with the rational decision-making of enterprises, reduce the country's tax revenue, and subsidize the world. We can take a look at which industry has solved the issue of excess capacity through exports: Photovoltaic? Steel? shipbuilding? Textile? The facts are there, but there are still many people who cannot face the fact that China's chemical fertilizers have already gone into production. Can we eliminate the world's advanced production capacity by liberalizing exports and subsidies? Adhering to the scientific concept of development is the yardstick that macroeconomic regulation should hold.