An Analysis of the Causes of the Downturn in the Fertilizer Industry in China

Looking back at the fertilizer market in the first half of the year, the situation is not optimistic: the prices of nitrogen, phosphorus and potassium are all steadily declining. The retailers and farmers are not enthusiastic about purchasing fertilizer, and the export situation is grim.

First of all, the main reason for the sluggishness of the domestic single fertilizer market this year is overcapacity. It is understood that the domestic production capacity of diammonium and monoammonium exceeds the actual demand by more than 50%. According to data from the National Bureau of Statistics, the cumulative physical quantity of urea in China from January to April this year was about 24 million tons, an increase of nearly 14% year-on-year. Since the beginning of this spring, local enterprises have used exports or even Jigang as the main means of reducing inventory. In mid-May, only Yantai Port urea had collected nearly 2 million tons of Hong Kong. At the same time, the Middle East and other places also rely on resource advantages to expand the production capacity of ammonium phosphate and urea, making the world fertilizer market a buyer's market, and the price is controlled by India.

Secondly, at the macro level, the economic environment at home and abroad is in the doldrums, the transaction price of raw materials at the upstream is low, and the downstream goods are not well taken. The state's land transfer policy has made the fertilizer market more reckless after the reshuffle. The domestic sales pattern has also changed, and the light season is no longer clear. The dealers are not affected by the low price in the off-season. Merchants are not willing to purchase in advance, and most of them go with the sales. In addition, inventory pressure reflects the contradiction between supply and demand is still outstanding, a variety of forms of price adjustment catalyzed the survival of the fittest, the big fish to eat small fish became inevitable.

China's chemical fertilizer industry must make progress on the “three carriages” that increase industrial concentration, optimize product varieties, and promote technological progress. The first is to establish a scientific and rational market access and elimination mechanism to promote the industry to be efficient, environmentally friendly, and energy-saving; second, to increase industrial concentration and promote the optimization of the chemical fertilizer industry structure; and third, to guide farmers to scientifically study soil and crop characteristics. Fertilization can increase the utilization rate of chemical fertilizers while achieving high quality and high yield of crops.