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The nitrogen fertilizer industry faces severe challenges in the second half of the year Author/Source: Sinochem New Network Date: 2020-07-06 Clicks: 6 On July 1, a symposium for key nitrogen fertilizer enterprises and a meeting of the International Trade Coordination Committee, organized by the China Nitrogen Fertilizer Industry Association, was held in Yinchuan, Ningxia. The information released indicates that in the first half of this year, there was an ample supply of nitrogen fertilizers in the domestic market, but prices dropped significantly compared to the previous year, leading to a sharp decline in corporate profits. In the second half of the year, due to factors such as the conditions in the international fertilizer market, changes in domestic production capacity, and environmental protection measures aimed at restricting production during autumn and winter, the fertilizer industry will face even greater challenges. According to Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, nitrogen fertilizer production increased significantly in the first half of this year. From January to May, the country produced a total of 24.611 million tons of synthetic ammonia, representing a 3.2% increase on a year-on-year basis; nitrogen fertilizer production amounted to 17.041 million tons, also with a 3.2% increase; urea production was 23.536 million tons in terms of physical volume, showing a 6.2% increase compared to the previous year. However, with the increase in domestic nitrogen fertilizer production and the decline in coal prices, nitrogen fertilizer prices are on a downward trend. The average price of urea from January to June was 1,666 yuan per ton, a decrease of 12.87% on a year-on-year basis. As a result, the proportion of losses in the nitrogen fertilizer industry has increased significantly. According to data from the **Statistics Bureau, 176 nitrogen fertilizer manufacturers were counted from January to April, of which 77 were losing money – an increase of 12 compared to the previous year. The proportion of companies in the industry that were losing money was 43.8%, up by 18.3 percentage points on a year-on-year basis. The total loss incurred by these losing companies amounted to 2.27 billion yuan, an increase of 140 million yuan compared to the previous year. Gu Zongqin said that in the second half of the year, the nitrogen fertilizer industry will continue to face unfavorable factors such as high costs, an expanding range of losses, an increase in fake and substandard products, and widespread losses for chemical products produced by these companies; thus, the business situation is not optimistic. To this end, companies should focus on five aspects to strengthen their internal capabilities, reduce costs, and enhance their competitiveness. First, attach great importance to epidemic prevention and control to ensure normal operations. Second, actively strive for natural gas resources and reasonable gas prices. Currently, international energy prices are low, and significant progress has been made in shale gas exploration and extraction technologies in our country. Fertilizer manufacturers with the necessary capabilities should actively cooperate with companies engaged in natural gas exploration and extraction in order to obtain stable and inexpensive sources of energy. Third is to improve the logistics efficiency of fertilizers. At present, a new round of infrastructure construction is underway; companies should strive to secure projects for dedicated railway lines and accompanying logistics facilities in order to enhance the automation and intelligence levels of logistics. Fourth, strengthen the management of international trade risks. Affected by the pandemic, the risks associated with export operations are also increasing; companies need to pay attention to risk management. Furthermore, urea futures can also be used to reduce international trade risks. Fifth, continue to optimize the product structure. On the one hand, it is necessary to vigorously promote new types of fertilizers that are efficient, eco-friendly, water-saving, and conducive to soil conservation; on the other hand, it is important to expand downstream products of synthetic ammonia, develop chemical products derived from syngas, as well as other high-end chemical products resulting from coal-based co-production. Wei Yong, director of the Information and Market Department at the Nitrogen Fertilizer Association, said that in the second half of the year, the nitrogen fertilizer industry should also pay close attention to the following factors. The first is additional production capacity. In 2020, an additional 1.32 million tons of urea production capacity is expected to be added in China. If the capacity that will be phased out is not taken into account, China’s urea production capacity will reach 67.48 million tons by the end of 2020. The new production capacity that will be in operation mainly in the second half of the year will have an impact on the market. The second is changes in demand. On the one hand, the impact of the pandemic is unlikely to dissipate in the short term, and demand in the nitrogen fertilizer industry may even decline. On the other hand, Sino-U.S. trade tensions, as well as strained economic and trade relations between China and Canada and Australia, and the locust plagues in Africa and Asia that have led to reduced crop yields, will prompt our country to place greater emphasis on domestic food production, which is likely to increase the demand for nitrogen-based fertilizers in agriculture. Overall, it is expected that demand for nitrogen fertilizers in our country will remain stable this year. Third is the production restriction policy. During the periods of severe air pollution this autumn and winter, the production of coal-based nitrogen fertilizers in the \"2+26\" cities in the Beijing-Tianjin-Hebei region and its surrounding areas, as well as in the Fenwei Plain and the Yangtze River Delta region, will be subject to hierarchical control measures. It is estimated that the capacity utilization rate of 90% of the new gasified nitrogen fertilizer plants will decrease by more than 20%, while that of most fixed-bed batch gasification plants will drop by more than 30%. This will have an impact on the supply of nitrogen fertilizers. The conference was held both online and offline, with 115 delegates attending the on-site meeting.