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The fertilizer sector has emerged from its downturn. Author/Source: Sinochem News. Date: December 10, 2020. Page views: 14. In previous years, after October, the fertilizer market would gradually enter a period of low demand, with prices generally trending downward. However, since October this year, fertilizer prices have risen against the odds. Against the backdrop of the domestic economic cycle, the increasing rigid demand in downstream sectors, coupled with favorable policy measures, has contributed to the gradual recovery of China’s fertilizer industry. Stocks in this sector such as Yuntianhua, ST Yihua, *ST LiuHua, Sierte, and Xinyangfeng are also quietly emerging from their lows. Policies are intensifying industry improvements. On one hand, the “final step” in the reform of the commercial fertilizer reserve system has finally been implemented. On July 31, the **National Development and Reform Commission and the Ministry of Finance jointly issued the **Regulations on the Management of Commercial Fertilizer Reserves**. The previous categories of “Central Disaster Relief Fertilizer Reserves,” “Commercial Fertilizer Reserves during Off-Seasons,” and **Potash Fertilizer Reserves” were merged into a single category: **Commercial Fertilizer Reserves**. The Measures came into effect on September 1, marking the official establishment of a national reserve system for chemical fertilizers in China. On the other hand, this year the fertilizer industry has entered its second round of elimination and structural restructuring. The trend of resources concentrating in large enterprises is accelerating; fertilizers are gradually returning to their role as agricultural inputs, and farmers are placing increasing emphasis on the cost-effectiveness of fertilizers. Excessive marketing has been declining over the past few years. Furthermore, the pandemic accelerated the formation of industry divides. Affected by the pandemic, this year large fertilizer manufacturers have seen higher growth in production and sales compared to previous years, while smaller companies have experienced a sharp decline in both their operational rates and sales volumes. After the pandemic, this trend will become increasingly evident, with large enterprises gaining greater advantages in resource allocation, cost control, and channel development. “The fertilizer industry has achieved significant results in phasing out outdated production capacity, further increasing industrial concentration. The number of enterprises in the fertilizer industry has decreased by over 30% ； At the same time, a number of outdated production capacities were phased out. Significant improvements were seen in the capacity structure and the comprehensive utilization of resources in the nitrogen and phosphate fertilizer industries; the domestic self-sufficiency rate for potassium fertilizers increased, and progress was made in product and technology upgrades. ”Wang Yu, assistant to the director of the Petroleum and Chemical Industry Planning Institute and a professor-level senior engineer, said. “The “La Niña phenomenon” will return. Currently, the focus of attention in the agricultural products market downstream of the fertilizer industry remains on the occurrence of the “La Niña phenomenon” and its consequences. According to climate forecasts issued by the World Meteorological Organization and multiple countries, a La Niña event has formed this winter. It is expected to persist until March 2021, affecting temperature, precipitation, and storm patterns in many regions around the world. Wu Caiyun, an investment advisor at CS Securities, believes that during previous La Niña episodes, the agricultural sector saw significant gains. This is because the \"La Niña phenomenon\" intensifies regional climate patterns – drought-prone areas become even drier, extremely cold regions become even colder, and areas with rain belts receive more rainfall. As a result, various agricultural crops such as rice and corn in summer, as well as wheat and sugarcane in winter, may experience reduced yields due to abnormal weather conditions associated with La Niña. Looking back at history, during the two moderate-scale \"La Niña\" episodes from August 2007 to May 2008 and from June 2010 to May 2011, the indices for agriculture, forestry, animal husbandry, and fisheries all saw significant increases. During the period from November 1, 2007, to February 29, 2008, the index rose by 18.89% ； Between July 1, 2010, and December 31, 2010, the index rose by as much as 48.2%. The severe cold weather affects crop production, which can lead to a reduction in the output of grains or agricultural products; this is also the main reason for the recent sharp rise in agricultural product futures prices. The return of the \"La Niña phenomenon\" will provide support for the fertilizer market. Supply and demand in the market are becoming tighter. Industry experts believe that the supply and demand situation in the domestic fertilizer market is tight, with prices expected to rise, and this is the main factor driving improvement in the fertilizer sector. From the supply side, taking the nitrogen fertilizer industry as an example, according to statistics from the China Nitrogen Fertilizer Industry Association, between 2015 and 2019, a total of 124 synthetic ammonia production enterprises closed down across the country, resulting in a loss of production capacity equivalent to 18.97 million tons ； 73 urea manufacturers withdrew from the market, resulting in a reduction in production capacity of 19.99 million tons. By the end of 2019, there were still 218 ammonia synthesis manufacturers in China, along with 190 nitrogen fertilizer production enterprises that were operating normally, of which 106 were urea producers. The production capacities for ammonia synthesis and urea were 66.19 million tons and 66.68 million tons respectively, representing decreases of 12.1% and 18.7% compared to 2015. From a demand perspective, Sino-U.S. relations are becoming increasingly tense. The United States is an important source of agricultural products for our country; if these relations deteriorate further, there may be uncertainty regarding the sources from which our country imports agricultural products. Furthermore, the impact of African locusts, the fall armyworm, as well as drought and flood disasters may lead to a decline in global food production, further emphasizing the importance of domestic food security and thus driving demand for fertilizer markets. “Since the beginning of this year, corn futures have risen by more than 35%, soybean futures by 26%, soybean meal futures by 18%, rubber futures by 13%, and cotton futures by 6%. Rising prices of agricultural commodity futures will ultimately be reflected in all aspects of the agriculture sector, which undoubtedly opens up possibilities for the fertilizer industry in the future. ”Industry experts believe.