What is the future for urea manufacturers?
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There is a severe overcapacity in urea production, raw material prices keep rising, and many companies are losing money. Yet there are still companies that continue to produce urea, on a significant scale at that. What’s going on? Do urea companies really have no choice but to fight among themselves? What are your expert opinions, everyone? What is the future for urea manufacturers???
In the long run, there will be no way out. Especially for low-grade urea, it’s better to take advantage of the opportunity to make some money now, rather than waiting until it’s **forced to shut down** later
During the current peak season for fertilizer use, many small urea production plants have stopped operating, and a large number of them may shut down by this winter; meanwhile, new plants are emerging like mushrooms after rain.
Given the current situation, it’s very likely that before a **forced shutdown occurs, many plants that consume large amounts of urea and similar substances will have to shut down on their own!
Just as in nature, \"survival of the fittest\"”
The last edit to this post was made by ch3ohnh3 on 2010-6-5 at 08:51. Reply to 1# XingTiandao: By 2015, the number of nitrogen fertilizer companies would decrease by 30%, dropping from 394 (based on group statistics) to 250, with 20 large-scale nitrogen fertilizer enterprise groups possessing core competitiveness being established. The urea production capacity in 2009 is shown in the table below: Number of enterprise groups involved in production, Urea production volume, Percentage of total national production >500,000 tons: 254, 296.87, 7.5%. It can be seen that in the future, most of China’s urea production capacity will be under the control of a few large enterprise groups!
The introduction of urea production always has a **background to it; in order to boost local GDP, such initiatives are implemented repeatedly in various places. Domestic production capacity is already overflowing; why introduce more? The one who can persevere, staying standing while others fall, is the true winner. In other words: the ability to withstand impacts must be strong!
This is an inevitable outcome of a market economy, as well as its initial stage. Due to overcapacity, it’s not only small urea plants that will fail; large urea production facilities lacking resource advantages will also have to close. With the recent rise in natural gas prices, urea plants that use coal as a raw material – especially those that rely on atmospheric-pressure fixed-bed gas production methods – face raw material costs that are higher than the price of urea itself. Both large and small-scale such plants are on the verge of closing down; who will be able to survive? It is impossible to “get through” it; even if one manages to get through it for a while, it’s not possible to do so for life. This is the cruelty and randomness of a market economy.
The ultimate winners among domestic urea producers are those provinces that have resource advantages and the right to carry out independent mining, especially those with coal resources. Recently, several large urea production facilities owned by Sinopec have stopped operating, not due to losses but in order to supply hydrogen to more profitable refineries. With these enterprises withdrawing, some market space may become available. In this round of closures, some small and medium-sized enterprises have also exited, and it is necessary to reorganize the business structure according to market principles. In areas where there are advantages in terms of raw materials, the competitiveness of existing or under-construction urea production facilities lies in their internal operational management; the one with lower costs will be the one that survives in the end.
Urea is definitely losing money at the moment. 1 **Price increases must be controlled carefully;** 2 technological upgrades are key – outdated production capacities are being phased out, and the industry is moving towards more advanced manufacturing processes. 3 The development of fine chemicals is necessary to create downstream products that can help cope with market conditions
In my opinion, this is also a negative effect that the internationalization of the market economy inevitably brings about. Monopolistic operations by a very small number of corporate groups are bound to occur; and even if that does not happen, macro-control measures will not be very effective at that point. After all, the overall economic situation may continue to develop in this way, and for those smaller companies, their only options are to close down or switch to another business area!