Expert: Transformation and upgrading is the inevitable path for the development of the nitrogen fertilizer industry

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Expert: Transformation and upgrading is the only path for the development of the nitrogen fertilizer industry. Author/Source: Sinochem New Network Date: 12-19-2019 Clicks: 8 At the 2019 National Conference on Key Technology Innovations in the Coal Chemical Industry, held from December 12 to 14, Yu Zifang, vice chairman of the National Synthetic Ammonia Expert Committee and general manager of Shanghai Damen Chemical Engineering Technology Co., Ltd., stated that transformation and upgrading is the inevitable path for the development of the nitrogen fertilizer industry. 　　Why is it necessary to carry out transformation and upgrading? Yu Zifang said that China’s nitrogen fertilizer industry has gone through many challenges and trials over the past 61 years, achieving certain results and making significant contributions to the development of agriculture in the country. We are now in a new stage of development. Faced with the challenges we encounter, particularly the weakening market demand, declining economic efficiency, and increasing pressure related to social responsibilities, how to achieve high-quality development has become an issue of concern for the entire industry. 　　Yu Zifang pointed out that the entire industry must recognize the current situation, adhere to the spirit of the Party, and follow the new development concepts of socialism with Chinese characteristics in the new era. It is necessary to accelerate the pace of transformation and upgrading, making this task a priority for every enterprise – understanding that only through such transformation can companies overcome difficulties and move in the right direction. 　　According to the **‘Action Plan for Zero Growth in Fertilizer Use by 2020’ issued by the Ministry of Agriculture, there should be zero growth in agricultural demand for fertilizers; in other words, demand will only decrease and not increase, with domestic agricultural demand showing a downward trend. 　　According to Yu Zifang’s industry research, by 2015, at the end of the 12th Five-Year Plan period, China’s consumption of chemical fertilizers (in pure terms) was 60.226 million tons. In 2016, during the 13th Five-Year Plan period, this figure dropped to 59.841 million tons, representing a year-on-year decrease of 0.64%. In 2017, it further decreased to 58.594 million tons, an increase of 2.08% on a year-on-year basis. The national use of chemical fertilizers has been on a downward trend since 2016, showing negative growth. Among them, the amount of nitrogen fertilizer used has been decreasing year by year since 2013. 　　Due to changes in the international demand for urea, China’s urea exports have declined significantly since 2016. In 2018, the export volume was 2.447 million tons, which represents a reduction of 11.301 million tons compared to 2015’s level of 13.748 million tons – an overall decrease of 82.20%. The nitrogen fertilizer industry suffers from low economic efficiency; its operating revenue was 210.76 billion yuan in 2018, a decrease of 50.91 billion yuan compared to 2014’s figure of 261.67 billion yuan, showing a downward trend year by year. The total profit was in the red for the first three years, with losses of 18.593 billion yuan; it turned profitable in the following two years, generating profits of 14.360 billion yuan. Over the five years, the total loss amounted to 4.233 billion yuan, and the revenue profit margin for these five years was -0.36%. Such market conditions result in poor economic performance, which indicates a need to adjust the product structure and change the mode of growth, said Yu Zifang. 　　A Model of Successful Transformation and Upgrading Yu Zifang pointed out that over the years, many nitrogen fertilizer enterprises across the country have gained valuable experience in adjusting their structures and undergoing transformation and upgrading, achieving significant economic benefits; some of their products and technologies also hold a certain position both domestically and internationally. Products such as dimethylformamide (DMF) produced by Shandong Hualu Hengsheng Chemical Co., Ltd., glucose and sorbitol manufactured by Shandong Lianmeng Chemical Co., Ltd., formic acid from Shandong Luxi Chemical Group Co., Ltd., ethyl and methyl maltol as well as acesulfame (AK sugar) produced by Anhui Jinhé Industrial Co., Ltd., melamine from Sichuan Jinxiang Sairui Chemical Co., Ltd., and pentaerythritol made by Hubei Yihua Group Co., Ltd., have all become part of the world’s largest production bases. Moroline produced by Anhui Jinmei Haoyuan Chemical Co., Ltd., ethylamine from Zhejiang Xinhua Chemical Co., Ltd., calcium sulfate produced by Jiangsu Hongze Yinzhu Chemical Group Co., Ltd., and products such as sodium hypochlorite and hydrogen peroxide manufactured by Guangxi Liuzhou Chemical Industry Group Co., Ltd., are among the highest in scale in Asia. 　　The successful experiences of these enterprises in transformation and upgrading serve as models for nitrogen fertilizer companies. What they all have in common is their focus on extending their product portfolios, pursuing a strategy that combines fertilizer production with other activities, and emphasizing the field of high-value fine chemicals. Amid the sluggish economic conditions across the industry, with revenue and profit margins showing negative growth for several consecutive years, some companies such as Shandong Hualu Hengsheng, Hubei Sanning Chemical, and Anhui Jinhé Industrial have managed to maintain upward trends in their revenue and profits after undergoing transformation and upgrading, achieving significant economic benefits. 　　How can nitrogen fertilizer companies achieve transformation and upgrading? Yu Zifang pointed out that it is necessary to first change mindsets and approaches. Transformation and upgrading should be regarded as the top priority for enterprises. Shift the focus from relying solely on fertilizer use and simply expanding production capacity to pursuing increased efficiency through higher yields and output values, while also improving technical and management standards as well as the quality and added value of products. Secondly, there is the need for an upgraded and transformed mode of development: shifting from a purely production-oriented approach to one that focuses on production services (such as services related to agriculture, targeted after-sales support, gas supply in industrial parks, and environmental protection services); moving from producing a single type of product to offering a variety of products (including new types of fertilizers, functional fertilizers, and products related to synthetic ammonia and other gases); progressing from low-quality, low-value products to high-end products with high added value and economic benefits; and expanding beyond the original industry scope into related fields such as fine chemicals, biopharmaceuticals, new chemical materials, and electronic chemicals. 　　Yu Zifang said that enterprises should establish organizations for transformation and upgrading, as well as formulate development plans. Assign professional technicians to work full-time on this task. It is necessary to pay attention to new technologies in various product chains as well as market trends, continuously tracking and collecting information on the market demand for various related products at home and abroad, as well as advancements in production technology and research developments. This information should then be compiled and analyzed in depth, and based on the company’s own conditions and the surrounding development landscape, a development plan for the company’s transformation and upgrading should be formulated. 　　It is necessary to strengthen research and investigation, and thoroughly prepare the work prior to the project. Yu Zifang pointed out that the selected product items should emphasize \"uniqueness, novelty, excellence, and high quality.\" A detailed thematic analysis must be conducted regarding domestic and international markets (present and future), technologies (various process routes), raw materials (supply sources), environmental protection and safety, as well as relevant product policies; a feasibility study for the project should also be carried out before the project is finalized. 　　It is necessary to strengthen technological innovation and promote transformation and upgrading. For enterprises that meet the requirements, it is recommended to establish product research and development centers, strengthen their R&D teams, conduct research and development on products of their own choice, and develop their own core technologies. It is also possible to choose new technologies for products that are not yet industrialized but hold potential for development. By making full use of societal resources and working together with relevant research institutions and universities through industry-university-research collaboration, it is possible to leverage respective strengths, complement each other’s advantages, accelerate the emergence of innovative results, and thereby enhance a company’s capacity for technological innovation. 　　Yu Zifang emphasized that under the current new circumstances, nitrogen fertilizer enterprises must remain true to their original aspirations and keep their mission in mind. Faced with difficulties, they should uphold the traditional spirit of not fearing challenges and strive hard. They need to maintain confidence as they pursue transformation and upgrading, moving from producing only nitrogen fertilizer products to developing a broader range of products. They should shift from being purely production-oriented to becoming production-service oriented, accelerating innovation, speeding up transformation and upgrading, improving technical standards and product quality, increasing the added value of their products, and boosting economic benefits. This will enable these enterprises to develop healthily and make new contributions to the high-quality development of socialism with Chinese characteristics.