Fertilizers: Logistics disruptions lead to declines in both production and sales

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Fertilizers: Disrupted logistics lead to drops in production and sales Author/Source: Sinochem New Network Date: 2020-02-14 Clicks: 164 The sudden outbreak of COVID-19 has had a significant impact on the domestic fertilizer market; due to disrupted logistics, both production and sales of fertilizers have declined. If this situation persists, it will have adverse effects on the upcoming spring planting season. Industry experts are calling on the relevant authorities to establish a \"green channel\" for the transportation of fertilizers as soon as possible, in order to meet the demand for fertilizers during spring plowing. 　　Production and sales have dropped significantly. Many urea manufacturers report that due to the impact of the pandemic, transportation was disrupted during the Spring Festival, preventing goods from being shipped out and leading to a significant increase in inventory levels among these companies. According to statistics, the current inventory of urea manufacturers across the country amounts to 1.021 million tons, a significant increase of 488,000 tons compared to the period before the Spring Festival, representing a year-on-year increase of 539,000 tons. Due to poor sales, the company had to reduce its production volume. In the second week of February, the average daily national urea production dropped to 128,000 tons, a decrease of 15,000 tons compared to the previous week, and 16,000 tons less than the same period last year. The operating rate of urea manufacturers dropped to 58.1%, a decrease of 6.6% from the previous week. Among them, the operating rate of manufacturers using coal as raw material was 63.9%, down by 7%; the operating rate of those using natural gas as raw material was 40.7%, down by 5.7%. 　　In contrast, the operating rate of compound fertilizer manufacturers declined even more significantly. Since compound fertilizers are produced in a discontinuous manner, unlike urea and ammonium phosphate which are manufactured on a continuous basis, compound fertilizer manufacturers generally close down during the Spring Festival, resuming production around the seventh day of the first lunar month. However, this year, due to the pandemic, the plans of compound fertilizer manufacturers to resume production were thwarted. 　　According to Xu Shuxian, an analyst at JLLC, for those enterprises that have suspended production or operations, they must obtain approval from the town (sub-district, development zone) where they are located before resuming work; in addition, they need to report to the relevant industry authorities before being allowed to do so. Enterprises that could undermine epidemic prevention and control measures are not permitted to resume operations. At present, companies need approval to resume operations, and such approvals are granted in batches and phases. The first batch includes mainly those engaged in the production of essential and scarce materials; fertilizer production was included in the first batch only in parts of the Northeast and South, while in most areas it was placed in the second batch. In some areas, the approval status is still pending. 　　It is understood that the production resumption at several compound fertilizer manufacturers in Jiangsu and Henan has been postponed to around February 17, while some companies in Shandong have delayed it to around February 13; individual enterprises in Hebei may not start production until late February. 　　According to statistics, in the second week of February, the operating rate of compound fertilizer manufacturers across the country was only 15.4%, a decrease of 14.6% compared to the period before the Spring Festival, marking the lowest operating rate on record. 　　Fertilizer manufacturers have not only seen a decline in production but also a significant drop in sales. Wang Wenkang, manager of Guangxi Lvming Agricultural Supplies Co., Ltd., said that fertilizers are different from ordinary chemical products as they need to be sold directly to farmers. At present, many areas have closed off villages and roads, preventing transport vehicles and even people from reaching the villages; in addition, there are often cases where unloading is not allowed in rural areas. As a result, delivering fertilizers to the villages – the \"last mile\" of distribution – faces numerous difficulties, and the sale of fertilizers is severely hindered. 　　Call for the establishment of a green channel: “We are now in the early stage of preparing for spring plowing, and the demand for chemical fertilizers will gradually increase after March.” If road traffic conditions do not improve in the near future, there will inevitably be a shortage of fertilizers in the end-market, which in turn will affect normal agricultural production. ”Wang Wenkang said. 　　Both fertilizer manufacturers and distributors are calling for the establishment of green channels for the transportation of agricultural supplies, so that such products as fertilizers can reach farmers in a timely manner. 　　Thankfully, the transportation issue has now drawn significant attention from the relevant authorities. 　　On January 30, the Ministry of Agriculture and Rural Affairs, the Ministry of Transport, and the Ministry of Public Security jointly issued an urgent notice titled \"On Ensuring the Normal Flow of ‘Vegetable Basket’ Products and Agricultural Production Materials,\" ordering that any actions such as setting up checkpoints without approval or blocking roads to disrupt traffic be strictly prohibited. On February 4, the Shandong Provincial Department of Transportation issued a notice titled \"Notice on Matters Concerning the Ensuring Smooth Transport of Important Supplies During the Pandemic Prevention and Control Period,\" requiring that vehicles transporting important supplies for industrial and agricultural production, such as agricultural materials, be given priority to ensure smooth passage. On February 7, the Ministry of Agriculture and Rural Affairs held a meeting to focus on epidemic prevention and control while coordinating the implementation of various current tasks, calling for enhanced stockpiling of seeds, fertilizers, pesticides, diesel, etc., in order to ensure a good harvest of summer crops. 　　In addition, the China Phosphorus Fertilizer Industry Association also calls on the relevant authorities to introduce policies as soon as possible to create a \"green channel\" for the transportation of agricultural supplies, ensuring smooth delivery of such supplies and enabling normal agricultural production after the epidemic. 　　“However, overall, the recovery of transport capacity remains slow at present, and road transportation in many areas is still stagnant. ”Wang Wenkang said. 　　Price declines dominate According to monitoring by the China Agricultural Inputs Distribution Association, since the outbreak of the pandemic, fertilizer prices have mainly declined. On February 10, the comprehensive index for China’s fertilizer wholesale prices was 2,022.27 points, a decrease of 0.76% compared to the period before the Spring Festival. The wholesale price index for urea in China was 1,798.9 points, down by 1.1%. The wholesale price index for diammonium phosphate in China was 2,603.38 points, with a decline of 0.5%. The wholesale price index for potassium chloride in China was 2,084.9 points, showing a decrease of 0.11%. The retail price index for compound fertilizers in China was 2,390.83 points, down by 0.99%. 　　Zhu Jian, marketing director of Hunan Tianbo Agricultural Inputs Co., Ltd., said that there are three main reasons for the decline in domestic fertilizer prices: first, due to poor transportation conditions, fertilizer companies have accumulated large inventories, and in order to boost sales they are forced to lower prices. Secondly, the pandemic has also had a significant impact on the sale of agricultural products; in some areas, vegetables and fruits have seen their prices drop sharply due to difficulties in transporting them or a lack of people willing to harvest them, and in some cases they end up rotting in the fields, which reduces farmers’ enthusiasm for using fertilizers. Third, market sentiment has changed. Initially, many people were optimistic about the trend in the fertilizer market after the Spring Festival, as the demand for fertilizers increased with the start of spring plowing, and the market was expected to see strong sales and production. However, the sudden outbreak of the pandemic led many to become pessimistic about future prospects, and downstream distributors became more cautious in stocking up on fertilizers, resulting in a delay in market demand. 　　Zhu Jian believes that the key to the future trend of the fertilizer market will depend on the control of the pandemic and the recovery of transportation services; until the pandemic is effectively brought under control, the fertilizer market is expected to remain in a weak state.