[SMM Analysis] Gradual Convergence of Industrial-Grade Monoammonium Phosphate and Phosphoric Acid Prices: Reasons Behind It?

In recent years, the prices of industrial-grade monoammonium phosphate and wet-process purified phosphoric acid have fluctuated, but their price trends have gradually converged. The price spread has narrowed from nearly 3,000 yuan/mt in 2022 to around 300 yuan/mt now. SMM believes that multiple factors drive this phenomenon, primarily the changes in supply and demand in the phosphorus chemical market and the impact of technological advancements.

First, from the market demand perspective, the application ratio of industrial-grade monoammonium phosphate in the new energy sector has gradually increased, mainly reflected in the production of LFP battery materials. In recent years, the NEV industry has experienced a period of rapid development, leading to a continuous increase in demand for high-quality industrial-grade monoammonium phosphate. Originally, the primary demand for industrial-grade monoammonium phosphate was in agricultural production. However, in the current new energy industry, the proportion of LFP batteries is increasing. As a precursor for producing LFP cathodes, iron phosphate currently uses the ammonium process for about 75% of its capacity. This growing demand has driven up the price of industrial-grade monoammonium phosphate. At the same time, the higher quality requirements for iron phosphate have prompted producers to use higher-grade raw materials, such as 73% industrial-grade monoammonium phosphate, which has relatively higher production costs and market prices.

Second, from the supply perspective, the capacity of purified phosphoric acid has been continuously released in the past two years, leading to an increase in market supply and a relative decrease in prices. However, the capacity of monoammonium phosphate has not significantly increased as the complexity of its production process and the specificity of its raw materials limited its capacity expansion. This change in the supply-demand relationship is also a crucial factor in the convergence of their prices.

Furthermore, technological advancements are also key factors affecting price trends. With the maturation of refined phosphoric acid technology and the release of capacity, the production cost of 85% phosphoric acid has decreased, leading to a drop in prices. However, as the production of high-grade industrial-grade monoammonium phosphate often requires the use of intermediates from refined phosphoric acid, its production costs increase. This technological difference is also reflected in the market prices of the products.

Reviewing 2022, the maximum price spread between purified phosphoric acid and industrial-grade monoammonium phosphate once reached nearly 3,000 yuan, with phosphoric acid prices approaching 10,000 yuan. This was mainly due to abnormal fluctuations driven by yellow phosphorus prices at that time. Now, with the adjustment of market supply-demand relationships and the impact of technological advancements, their prices have gradually converged.

Looking ahead, with the continuous development of the new energy sector and the widespread application of the ammonium process in the production of LFP battery materials, the demand for industrial-grade monoammonium phosphate is expected to continue its growth trend. Although purified phosphoric acid is also widely used in other fields, with the main phosphorus sources for the iron phosphate sodium process and iron process coming from phosphoric acid, its price may continue to face certain pressures due to capacity expansion and changes in downstream demand. Currently, phosphoric acid prices are already at historical lows.

In summary, the convergence of industrial-grade monoammonium phosphate and purified phosphoric acid prices results from multiple factors. Driven by demand in the new energy sector, along with technological advancements and capacity expansion, the price gap between the two has gradually narrowed. However, market dynamics are ever-changing, and SMM will closely monitor changes in the fundamentals to more accurately grasp the price trends of the two and their impact on the costs of downstream iron phosphate and LFP.