A thorough discussion on how nitrogen fertilizer companies can cope with the crisis

The urea market faces internal and external challenges; the crisis is driving industry consolidation–Source: Internet. The urea market is confronted by various problems. With the impact of the financial crisis, starting from the second half of 2008, China’s nitrogen fertilizer industry encountered severe difficulties, and to this day, the domestic nitrogen fertilizer market has yet to recover. A sluggish international market, export tariffs, and shrinking domestic demand – these adverse factors are all hindering the recovery of the nitrogen fertilizer industry. Amid the crisis, manufacturing companies struggle to move forward amid internal and external pressures, while distribution companies operate with extreme caution. This sudden financial crisis coincided with the intensification of contradictions in the structure of China’s nitrogen fertilizer industry – what challenges do domestic enterprises actually face? When will we be able to break this deadlock? How exactly can enterprises base themselves on reality, overcome difficulties, and find their own path to development? It is an undeniable fact that the domestic urea market is currently facing a surplus supply. According to data from the **Statistics Bureau, China’s urea production capacity is expected to reach nearly 63 million tons in 2009. Assuming industrial and agricultural demand amounts to 51 million tons, even if 3 million tons of urea are exported throughout the year, there will still be a surplus of nearly 10 million tons. In other words, by the end of 2009, the total inventory in the market will be higher than that at the beginning of the year. Although the domestic fertilizer use period in our country lasted for a long time in the first half of the year, demand remained stable, the supply and demand of resources across the country were in balance, and the market as a whole remained stable. However, since this spring, urea prices have remained at relatively low levels. The main reasons for this are: the sluggish fertilizer market at the end of last year led to a lack of confidence in the nitrogen fertilizer sector, as well as significant inventory pressures on manufacturers ； Due to low prices of crops such as grains, cotton, fruits, and vegetables, farmers’ incomes remain unsatisfactory. Additionally, affected by the financial crisis, their earnings from working outside farming have declined, which has reduced their purchasing power and led to weak demand for fertilizers ； Affected by the downturn in industries such as real estate and building materials, demand for industrial urea has dropped significantly. At the same time, export policies designed to balance nitrogen fertilizer production capacity between peak and off-peak periods have also become a bottleneck to the industry’s recovery. High tariffs of 110% in the first half of the year restricted the export of urea; although these tariffs have recently been reduced to 10% and the export deadline has been extended, low prices in the international market still prevent domestic urea manufacturers from exporting, even at the risk of incurring losses. In the second half of the year, most areas across the country enter a slack season for fertilizer use, resulting in a decline in market demand. Stabilizing the market during this period is an issue that production and distribution companies must address seriously, and it is also an issue that **requires effective measures to be taken to resolve it. The crisis drives industry consolidation. This financial crisis is undoubtedly a severe blow to both enterprises and the entire industry; it has severely weakened nitrogen fertilizer production companies, and company leaders are facing extremely difficult circumstances amid numerous threats. Sun Deliang, general manager of the sales company of Shandong Alliance Chemical Group, said that the biggest challenge facing companies at present is the market situation; the decline in market demand has led to a continuous drop in urea prices, with some companies on the verge of losing money. “The biggest impact of the financial crisis on companies is not a decrease in sales volume, but rather a reduction in profits. Recently, the prices of urea and ammonium bicarbonate have continued to fall, preventing many companies from operating normally. Although the prices of coal raw materials and crude oil have fallen, the rate of decline in production costs is far slower than that of the prices. ”This is what Huang Dianfu, deputy general manager of Jiangsu Hengsheng Fertilizer Co., Ltd., said. At the International Nitrogen Fertilizer and Methanol Summit held in Shanghai in May this year, enterprise representatives from across the country gathered to discuss effective strategies for helping the nitrogen fertilizer industry overcome its current challenges. Liu Shulan, vice president and secretary-general of the China Nitrogen Fertilizer Industry Association, called out loudly: With the development of global integration, Chinese nitrogen fertilizer companies need to go abroad, compete in international markets, strengthen exchanges and communications with their international counterparts, and improve their own standards and competitiveness. It is necessary to export urea in appropriate amounts; such exports can help resolve industry crises and boost corporate confidence. Whether it is a shrinking market, overcapacity, falling profits, or restricted exports, these issues undoubtedly place greater demands on the development of China’s nitrogen fertilizer industry as well as on the survival of domestic enterprises. As the **Prime Minister said: In such difficult times, what matters most is to muster courage and confidence, which are more valuable than gold and money. Liu Shulan pointed out that what ultimately determines competition between companies is cost. After decades of development, companies across the industry have reached similar levels in terms of plant management and technical measures; there is little room to reduce costs by saving energy and reducing consumption, so cost competition takes place in the price differences of raw coal. Liu Shulan suggested that for projects lacking a raw material advantage, **policies should be introduced to prohibit their initiation. Xu Deren, deputy general manager of the Nitrogen Fertilizers Division at Sinochem Fertilizer Co., Ltd., suggested that **relevant departments should formulate medium- and long-term development plans for the fertilizer industry, accelerate integration within this sector, prevent blind expansion of fertilizer production capacity, and encourage large fertilizer companies that possess advantages in terms of cost, resources, and production technology to grow stronger. This crisis has accelerated the consolidation and elimination of fertilizer companies in our country, as well as the adjustment of their product portfolios. Those companies that are highly polluting, have outdated production capabilities, and weak competitiveness will be phased out. Through this restructuring, the nitrogen fertilizer market has returned to a state of orderly competition. Without this crisis, the consolidation of companies and the adjustment of their product portfolios would not have occurred so rapidly. In the long run, this crisis has enhanced the market competitiveness of these companies, contributing to the healthy and sustainable development of China’s fertilizer industry. The double-edged sword of the financial crisis has brought an era of consolidation to China’s nitrogen fertilizer industry. Everyone does their best to overcome the crisis. In May of this year, the Executive Meeting of the State Council reviewed and approved in principle the \"Plan for the Adjustment and Revitalization of the Petrochemical Industry.\" The National Development and Reform Commission stated that it would accelerate the phasing out of outdated production capacity by revising and improving industrial policies, establishing mechanisms for reducing production capacity, and promoting technological upgrades in enterprises. How to face crises, foster the growth of the enterprise itself, and remain unbeaten in an increasingly competitive market environment is a challenge faced by many companies. As the saying goes, when the Eight Immortals cross the sea, each shows their own magical powers. Each company is seeking a development path that suits it in order to establish a strong position in the market. Reduce costs and optimize management. Shandong Luxi Chemical sets strict requirements and plans for every stage of production in order to reduce costs. When purchasing raw materials, strive to work with large mines in order to obtain them at low prices. At the same time, efforts should be made to enhance technological upgrades and introduce advanced equipment, so that ordinary coal can also be used as a raw material for urea, **thereby reducing the production costs of urea. Quality first, service supreme. Henan Xinlianxin Group makes full use of its advantages in quality, continuing to maintain a cost leadership in its production systems. On the one hand, strict quality control is maintained at the product level, connecting with farmers through integrity and establishing a strong brand presence among them; on the other hand, excellent service is provided through various distribution channels, building trust with customers through sincerity and forging strong partnerships in the supply chain. To strengthen its distribution channels, the company provides better services to its dealers, offering them free training in specialized technical skills as well as knowledge related to fertilizer marketing, thereby reinforcing the commitment to a win-win situation. The company plans to form more agricultural service teams in the future, in order to provide agricultural services more conveniently and swiftly. Stabilize the market and expand channels. After facing difficulties in exports, Shanxi Jiaocheng Hongxing Chemical turned its focus to the domestic market. While strengthening its existing sales network within the country, it actively expanded its sales areas and sought new channels for sales, securing new market opportunities in North China and the Jiangsu-Zhejiang region. While strengthening their overall capabilities, companies are also keeping an eye on market trends in the second half of the year. Sun Deliang believes that after August, the national market will enter a slack season, with demand for urea further decreasing; this mismatch in demand may force some companies to reduce production or even cease operations. Yet, no matter how severe the circumstances, China’s nitrogen fertilizer companies are working hard to strengthen their internal capabilities, reduce costs, improve quality, and boost confidence in order to emerge victorious in this round of elimination. The nitrogen fertilizer industry faced more intense market competition during the financial crisis. As the waves sift through the sand to reveal gold, in this new round of integration and elimination, many companies will succeed thanks to their excellent performance during crises; they will strengthen their competitiveness through the experience of overcoming those crises.

It's good to pay employees more at this time

This post was last edited by snowdfr on 2009-8-5 at 12:09. It’s exactly the opposite in our case: all employees are required to raise funds, and the amount of funds raised is taken into account in their annual performance evaluations, as well as in decisions regarding their promotion or salary increases. Ugh,,,

Fertilizers: Who counts as outdated production capacity? Who should be eliminated? On May 3, the **National Development and Reform Commission announced the plan targets for phasing out outdated production capacity in China over the next 3 years, with the fertilizer industry being a key sector for such actions. On May 18, the full text of the \"Plan for the Adjustment and Revitalization of the Petrochemical Industry\" was released. This plan also calls for accelerating the phasing out of outdated production capacity in the fertilizer sector, with fertilizer manufacturers using methods such as consolidating smaller plants and replacing outdated production capacity with more efficient ones. According to statistics, at present, in China, aside from the need for a certain amount of potassium fertilizer imports, there is a clear overcapacity in both nitrogen and phosphorus fertilizers. The production capacity for urea and diammonium phosphate is in excess by 10 million tons and 6 million tons respectively. It is a practical necessity for China’s fertilizer industry to phase out outdated production capacity. However, during the subsequent steps, differing opinions emerged within the fertilizer industry. The disagreement lies in what exactly constitutes outdated production capacity What exactly are the outdated production capacities? Who should be eliminated? 　　What are the criteria for outdated production capacity? At present, the term ‘outdated production capacity’ is used quite broadly in the fertilizer industry; it remains a general expression only. ”Wei Chengguang, president of the Potassium Salts Branch of the China Inorganic Salt Industry Association, told reporters. 　　According to him, there are currently no relevant technical standards or regulations in the country that specify what energy consumption levels fertilizer manufacturers should achieve, or which equipment is considered advanced and which is considered outdated. Therefore, there are currently no applicable technical standards to specifically assess outdated production capacity. 　　“There is no unified definition of what constitutes outdated production capacity in the industry at present. ”Ling Xiaodong, the chief engineer of Yuntianhua Group Co., Ltd., and Zuo Yongchun, the general manager of Jiangsu Jiangyan Fertilizer Co., Ltd., both told the reporters as much. They said that when measuring underutilized production capacity, there are no clear indicators regarding enterprise size, energy consumption, or emissions levels. 　　The lack of clear indicators has also caused confusion among enterprises. The \"Plan for the Adjustment and Revitalization of the Petrochemical Industry\" specifies that clean coal gasification and hierarchical energy utilization technologies should be adopted to adjust the raw material and energy sources used by existing nitrogen fertilizer manufacturers, thereby diversifying the raw coal sources and reducing costs ； Construct large-scale nitrogen fertilizer production facilities in energy-producing areas to replace outdated production capacity ； Optimize the allocation of phosphorus fertilizer resources, and promote technologies such as the comprehensive utilization of sulfur and low-grade phosphorus ores. In response, Chen Lin, the technical director of Anhui Huaihua Co., Ltd., complained to reporters: “This sets out requirements for advanced production capacity, but it doesn’t mention what constitutes outdated production capacity.” The plan mentions phasing out smaller units in favor of larger ones, as well as eliminating outdated production capacity. But what is big? What is small? How big? How small? Should it be divided by output? Should it still be classified by process? ” 　　Many company executives also told reporters that regarding this issue, many companies are currently completely confused. 　　Some enterprise leaders also pointed out that although the relevant authorities have called for the elimination of outdated production capacity, no technical standards have been established, leaving fertilizer companies unsure as to which ones should be phased out and which ones should not. In this case, wouldn’t eliminating outdated production capacity become empty rhetoric with no real meaning? 　　What are the characteristics of outdated production capacity? Indeed, many industry professionals have shared their views on outdated production capacity, and some have even identified its characteristics. 　　Kong Xianglin, vice president of the China Nitrogen Fertilizer Industry Association: \"Underdeveloped production capacity refers to those facilities that fail to meet environmental standards and have high energy consumption, but yet possess cost advantages.\" ” 　　Gu Zongqin, Director of the Petroleum and Chemical Planning Institute: \"Underdeveloped production capacity refers to capacity with low technical levels and weak competitiveness.\" ” 　　Wu Xixian, President of the China Phosphate Fertilizer Industry Association: \"Unreasonably allocated resources represent backward production capacity.\" ” 　　Jiang Dongqing, the chief engineer at Jiangsu Taixing Fertilizer Factory, believes that production capacities with high energy consumption and high costs are outdated ones. He gave an example of such a situation: an aging fertilizer manufacturing plant with a heavy labor force, outdated equipment, and high energy consumption. It produces 20,000 tons of synthetic ammonia per year, has over 700 employees, and consumes 1.5 tons of coal per ton of ammonia produced ； Another newly established fertilizer plant features advanced manufacturing processes and a high degree of equipment automation; it produces 300,000 tons of synthetic ammonia per year, has over 200 employees, and consumes 1.2 tons of coal as raw material. In comparison, the former is clearly outdated production capacity. 　　There are also innovative views put forward by industry insiders. Wei Chengguang believes that there is a shortage of potash fertilizer supply in the country at present, so there is no issue of overcapacity; however, this does not mean that there is no outdated production capacity in the potash fertilizer industry. At present, the production standards of some small potassium fertilizer manufacturers are relatively low, and there are practices such as unauthorized mining and extraction, as well as the discharge of waste brine on-site. Such enterprises certainly belong to outdated production capacity. 　　Although these views are not entirely identical, overall, high energy consumption and low environmental protection standards are likely to be common characteristics of outdated production capacity. 　　Does a small scale necessarily mean backwardness? So, do devices with a small scale necessarily have high energy consumption and low environmental standards? 　　Gu Zongqin believes that, in accordance with **industry access policies, when a company builds a new nitrogen fertilizer production facility, the capacity of the pure oxygen gasification unit should be no less than 300,000 tons per year of synthetic ammonia, while the capacity of the oxygen-enriched gas production unit should be no less than 200,000 tons per year of synthetic ammonia ； For phosphate fertilizer manufacturers, the capacity of a new production unit in Yunnan and Guizhou should be no less than 300,000 tons per year (converted to phosphorus pentoxide, the same applies hereafter), while in other regions with available resources, the capacity of a new production unit should be no less than 120,000 tons per year. Therefore, for newly built fertilizer plants, according to this industrial policy, those that fall short of the aforementioned scale and technical requirements are considered backward production capacity. 　　However, industry experts say that for existing fertilizer plants, a smaller scale does not necessarily mean they are backward. 　　Kong Xianglin believes that, in fact, it is difficult to define outdated production capacity in terms of scale. Some nitrogen fertilizer companies are small in scale, but their production costs are very low, and they also do a good job in diversifying their operations. Regarding environmental protection standards, Kong Xianglin believes that after years of improvement, domestic small and medium-sized fertilizer enterprises have managed to make full use of the waste residues and exhaust gases generated by their fixed-bed gas generation systems; wastewater is now emitted at zero levels, and coal slag is also utilized in various ways. Therefore, fixed-bed gas generation units are not only not considered obsolete production capacity, but also represent an economically viable technical option. 　　Zhao Shuxun, deputy general manager of Taixiang Fertilizer Co., Ltd. in Junan County, Shandong Province, which produces 50,000 tons of synthetic ammonia per year, told reporters that in China, some production facilities that generate 60,000 tons of synthetic ammonia per year do not have higher average coal and electricity consumption than those that produce 200,000 tons per year; the key is for enterprises to continuously adopt new processes and equipment for technological upgrades. 　　Ling Xiaodong, the chief engineer of Yuntianhua Group Co., Ltd., which has a nitrogen fertilizer production capacity of 1 million tons per year and the highest production capacity for phosphate fertilizers in the country, also agrees that size should not be used as a criterion to determine backwardness: \"Regardless of the scale of production, as long as a company has cost advantages, it can survive and develop.\" ” 　　“Underdeveloped production capacity should not be determined solely based on capacity and output; it needs to be assessed comprehensively from aspects such as technology and management. ”Zuo Yongchun said the same thing. 　　Liu Shulan, secretary-general of the China Nitrogen Fertilizer Industry Association, made it clear that policies advocate for the development of larger facilities at the expense of smaller ones in order to phase out outdated production capacity. However, it is easy to develop larger facilities, while phasing out smaller ones is not as simple as it sounds. She believes that in our country, the majority of ammonia synthesis plants have an annual production capacity of less than 40,000 tons, and the ammonium bicarbonate they produce is usually sold and used locally. Some small nitrogen fertilizer companies still serve as sources of employment for local workers and are key contributors to fiscal revenue; therefore, implementing mandatory elimination measures would pose problems for farmers’ employment and social stability. 　　Gu Zongqin also said that some small-scale facilities, if managed properly and at low cost, cannot be considered backward production capacity. 　　Does a larger scale necessarily mean greater advancement? “Currently, fertilizer production facilities are generally moving toward larger sizes and greater scale.” The technology and processes of large-scale installations are advanced, being on a different level of development from those of small-scale installations. ”A senior official from Qingdao Huachang Group said. 　　It might sound as though the larger the scale of a device, the more advanced it is, but Ling Xiaodong holds a different opinion. He believes that for large-scale facilities and enterprises, if management is not properly handled and technological upgrades are not kept up, energy consumption will remain high, resulting in outdated production capabilities. 　　Liu Shulan believes that in raw material-producing areas such as Inner Mongolia, the new large-scale facilities, despite employing advanced gasification technologies, still have high electricity consumption. For large devices, it becomes difficult for them to survive if they do not enjoy discounts on electricity costs and transportation. “When installing a new fertilizer plant, it cannot be put into operation if conditions such as raw materials, water, and environmental capacity are not available. For newly installed facilities, thresholds also need to be set – regarding the scale of production capacity and the conditions for companies to enter the market, as well as the scale of production capacity and the conditions for companies to exit it. Enterprises that cause pollution in the local area, those that suffer from losses on a long-term basis, and even large-scale ones with outdated production capabilities should also be phased out. ”Furthermore, the cost of transporting 1 ton of coal is the same as the cost of producing 1.2 tons of urea. At present, railway capacity is limited, which poses constraints on the transportation of fertilizer products; therefore, from a transportation perspective, it is more appropriate to locate fertilizer production facilities near consumption areas. From this perspective, it’s not the case that larger-scale installations are necessarily more advanced and competitive, while smaller-scale ones are less competitive. 　　Wu Xihyan pointed out that in China’s phosphate fertilizer industry, it are not the small enterprises that have been severely hit by the international financial crisis; rather, it is the large, key enterprises with advanced technology and efficient resource utilization capabilities that have been affected. When leading enterprises face difficulties in their operations and are struggling to survive, they lack the capacity to acquire, restructure, or replace smaller companies. 　　Given such significant differences in the determination of outdated production capacity in the fertilizer industry, how then can the acceleration of phasing out such outdated capacity, as proposed in the \"Plan for the Adjustment and Revitalization of the Petrochemical Industry,\" be achieved?

Generally speaking, under the same conditions regarding electricity, gas, water, and coal prices, the larger the scale of a facility, the lower its energy consumption will be. The key factor is whether there are preferential pricing measures in place; it’s difficult to determine exactly what profit a company will make. As for outdated production capacity, I believe that in the case of existing companies, the market determines whether they are considered outdated or not – if they make a profit, then they’re not outdated. For newly established companies, uniform energy consumption standards should be applied, with a relevant authority overseeing their compliance with these standards

Given the current slow pace of economic development, there are several ways for enterprises to overcome crises: 1. Properly understand the relationship between a company’s survival and its development. Faced with low prices for their products, nitrogen fertilizer manufacturers should assess the situation carefully. When operating on the brink of profit or loss, companies should consider their long-term development, predict market trends, and continue operating only if it is feasible; otherwise, they should cease operations； Avoid individual heroism and recklessness that exhaust the company’s existing resources; when market opportunities arise in good economic times, the company is unable to take advantage of them due to a broken capital chain ； 2. Taking this opportunity, for devices undergoing “planned minor repairs, change to medium repairs” ； Planned modification of major overhaul ； No matter how it’s repaired, it must be done meticulously. Adopt a strategy of partial inactivity, avoid certain tactics, preserve strength, and focus on training and preparation in order to be ready for another battle ； 3. Strengthen the mass-driven effort to save energy and reduce costs; technological upgrades and cost reduction are scientific approaches. Reducing consumption across all levels of the workforce is an ongoing challenge for enterprise management, as competition among companies revolves around quality, cost, and talent ； 4. Make every effort to eliminate safety hazards; prioritize safety at all costs. Even when the market is sluggish, employees’ morale must not decline. It is essential to focus on the production process and ensure the personal safety of employees as well as the safety of the equipment, in order to guarantee safe production ； 5. The company strives to do practical things and good deeds for its employees, ensuring that they can lead a peaceful and comfortable life; it creates conditions that enable employees to feel that the company is their reliable source of employment, with their own success tied to that of the company and their own shame associated with its decline ； Foster and uphold a high standard of professional ethics among employees, serving as role models in the profession ； 6. Do everything possible to ensure the smooth operation of the business’s capital flow ； 7. Actively convey to policymakers at all levels the situation of enterprises and industries, as well as their work plans and difficulties, in order to secure support from governments, financial institutions, and other sectors of society. 8. Vigorously organize competitions aimed at reducing costs, ensuring survival, promoting safe production, stabilizing output, and achieving high yields, relying on employees to overcome crises ； Many hands make light work; working together, we can move a big ship forward.