2025 Phosphate Rock Market Paradox: Soaring Production, Yet Persistently High Prices?

2025 Phosphate Rock Market Paradox: Soaring Production, Yet Persistently High Prices?

Economic textbooks often tell us that increased production capacity typically leads to price drops. However, China's phosphate rock market in 2025 is staging an "unconventional" trend: double-digit growth in output coexists with continuously high prices. What market logic lies behind this phenomenon?

I. Production Surges Nearly 15%, Four Provinces Contribute 95% of National Supply
Data from the National Bureau of Statistics shows that from January to August 2025, China's total phosphate rock output reached 824.182 million tons, a year-on-year increase of 14.78%, continuing the recent production growth trend.
This growth is primarily driven by two factors:

• New Capacity Commissioning: Approximately 100 million tons of new production capacity reportedly came online in 2025.

• Downstream Demand Support: Steady demand growth from the agriculture and new energy sectors provided an outlet for absorbing this increased capacity.

Regionally, phosphate rock production is highly concentrated. The four provinces of Hubei (~298.8 million tons), Yunnan (~228 million tons), Guizhou (171.7 million tons), and Sichuan (116.8 million tons) collectively contribute 95% of the national output, forming a supply pattern primarily driven by the "twin cores" of Hubei and Yunnan.

II. Why Do Prices Remain Firm Despite Production Growth?
Despite the significant increase in output, phosphate rock prices have not fallen as might be expected. Instead, they continue to trade within a historically high range. This seemingly contradictory situation is mainly the result of four interacting factors:

1. Structural Shortage: High-Grade Ore is "Hard to Come By"

While total production has increased, market transactions predominantly involve medium and low-grade ore. The supply of high-quality phosphate rock remains consistently tight. This structural mismatch between supply and demand is a key factor supporting prices.
2. Limited Circulating Supply: ~74% of Output is "Self-Produced and Self-Used"
Data indicates that about 74% of phosphate rock production comes from enterprises with integrated downstream processing capabilities. Only about 26% enters the market for open circulation. This industry-wide vertical integration model limits the actual tradable supply, keeping the market in a "tight balance" state.
3. Rising Costs Offset the Effects of Capacity Expansion
Due to the natural decline in ore grades and stricter environmental requirements, phosphate rock mining costs continue to rise. The price-suppressing effect of new production capacity is partially offset by these increasing costs.
4. "Dual-Engine" Demand: Agricultural Base + New Energy Pull

• Stable Agricultural Demand Foundation: Demand for traditional phosphate fertilizers like Monoammonium Phosphate (MAP) and Diammonium Phosphate (DAP) remains solid.

• Rapid Growth in the New Energy Sector: Fuels fast-growing demand for materials such as Wet-Process Phosphoric Acid, Ferric Phosphate, and Lithium Iron Phosphate (LFP).
  This increasingly diversified demand structure provides ongoing support for prices.

III. Outlook: Can High Prices Be Sustained?
In the short term, the four factors – structural supply mismatch, limited circulating volume, rigid costs, and diversified demand – collectively form a support system for phosphate rock prices.

In the long run, as new production capacity continues to be released, market supply is expected to gradually become more ample, potentially weakening the pricing power of upstream producers and limiting further significant upward price momentum.

However, considering the non-renewable nature of phosphate rock resources, its inherent scarcity establishes a clear price floor, suggesting limited room for substantial price declines in the future.

Overall, the phosphate rock market post-2025 is more likely to enter a new phase characterized by "rational fluctuations and range-bound operation," moving away from the volatile swings of the past towards a more stable and sustainable development track.

Implications for the Flame Retardant Industry:
As a key raw material for phosphorus-nitrogen flame retardants, the high price and structural tightness of phosphate rock are transmitting along the industrial chain. For flame retardant producers and downstream manufacturers, this means facing pressure from rising costs on one hand, and needing to guard against supply risks for high-grade raw materials on the other.

In this context, Yinsu Flame Retardant is also strengthening R&D to enhance flame retardant efficiency (reducing unit consumption) and exploring high-performance alternative solutions. This is no longer just precautionary but a necessary choice for adapting to the new market normal.