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2020: Will compound fertilizers break free from their constraints or revert to old paths? Author/Source: China Fertilizer Network Date: 2019-12-30 Clicks: 5 As the bells of Christmas ring, New Year’s Day in 2020 is just around the corner, and the Spring Festival is also approaching. 2019 is thus coming to an end swiftly and quietly. Recall that in 2017, the price of compound fertilizer rose sharply due to environmental regulations. In 2018, its price fluctuated unpredictably, with environmental factors playing a significant role. In 2019, under pressure from weak demand, the price of compound fertilizer continued to decline. So, will compound fertilizer manage to break out of its current predicament in 2020? Or should we still follow the old path from 2019? Negative factors prevailed throughout the year, resulting in a poor market situation for compound fertilizers. Firstly, raw material prices fluctuate extremely frequently. Looking at the raw material market in 2019, the prices of nitrogen, phosphorus, and potassium generally showed a downward trend. Although urea prices fluctuated, the ex-factory price for small granules dropped from 1,890 yuan per ton at the beginning of the year to 1,650 yuan per ton by year-end—a decline of over 200 yuan per ton. In the short term, speculative price increases driven by factors such as Indian import tenders, environmental regulations, and futures trading had very limited impact ； With falling sulfur prices and weak demand from compound fertilizer manufacturers, the ex-factory price of monoammonium phosphate in Hubei region has also dropped from 2,150 yuan per ton at the beginning of the year to 1,750 yuan per ton, a decrease of around 300 yuan per ton ； At the beginning of the year, the arrival price of potassium chloride in the salt lake region was 2,420 yuan per ton; by the end of the year, this price dropped to 2,030 yuan per ton, representing a decline of over 300 yuan per ton. Given the astonishing drop in the prices of nitrogen, phosphorus, and potassium, it is easy to understand why the prices of compound fertilizers have also fallen. Secondly, downstream demand is uncertain. The psychological concern of \"price increases in off-peak seasons and price drops in peak seasons\" constantly haunts downstream users. Especially last year, as grain prices kept falling, many dealers who had stocked up on fertilizers in advance suffered heavy losses, which severely dampened their willingness to stock up on fertilizers. As a result, in 2019, downstream users chose not to stock up in large quantities during off-peak periods, waiting until near the time when fertilizers would be needed to start purchasing them. Although low prices and attractive products are available from time to time, it is difficult to build widespread confidence among downstream users. Secondly, production started at a low level, but competition in the compound fertilizer market is extremely fierce. Throughout 2019, the operating capacity of compound fertilizer manufacturers remained in the range of 40%-50%; companies were reluctant to increase their production levels. Some enterprises in Shandong and Hebei operated at reduced capacities due to environmental regulations, and a few compound fertilizer manufacturers were forced to relocate. Even with such low levels of operation, the situation of supply exceeding demand could not be reversed – there was still an excess of compound fertilizer products, and with declining usage rates, competition among companies became extremely fierce. Various tactics such as offering premium products at ultra-low prices were employed, but by the end of the year, the overall market situation for compound fertilizers remained very poor. There are few positive factors – is there any chance of a turnaround at the start of the year? Firstly, the traditional compound fertilizer industry has hit a bottleneck, while new types of fertilizers have emerged rapidly. While there is fierce price competition in the market for traditional fertilizers, this year new types of fertilizers have been showcased at various exhibitions; fertilizers containing humic acid, microbial agents, organic matter, and similar components are emerging in increasing numbers. This indicates that the profit margins for traditional fertilizers are being squeezed lower. Some compound fertilizer manufacturers are shifting to produce these new types of fertilizers, and it can be said that this might represent a new direction for them. However, it also poses significant challenges in terms of financial resources and marketing efforts. Secondly, the pace of capacity reduction is accelerating, with large compound fertilizer manufacturers being included in the list of those to be phased out. In the previous years, restructurings and bankruptcies among compound fertilizer companies mainly occurred among small and medium-sized firms; in 2019, even large compound fertilizer companies were not spared from this tragic fate. Several large factories in Shandong province went bankrupt or underwent restructuring, while most smaller factories stopped production and waited to see what would happen. The pace of capacity reduction accelerated once again, but complete elimination has not yet taken place. Therefore, the next few years will be a critical period determining the survival of traditional compound fertilizer industries. In summary, the market for compound fertilizers in 2019 continued the sluggish trend seen in 2018. So, can the compound fertilizer industry experience a turnaround in 2020? China Fertilizer Network predicts-------.