The fertilizer market faces multiple pressures; the industry places its hopes on policy measures

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The phosphorus compound fertilizer conference is approaching, and as has been the case in previous years, this undoubtedly signals that the fertilizer market is about to pick up momentum. From then on, as manufacturers’ winter storage strategies become clearer, the market will enter a period of about 3 months dedicated to winter fertilizer stockpiling; during this time, manufacturers will collect payments while downstream distributors build up their inventory, resulting in a highly active market. However, based on current feedback from the industry, the performance of this year’s winter storage market is likely to fall short of previous years’ levels. Due to pessimistic expectations for future trends, some experienced industry professionals have begun to call for zero tariffs on exports; the root cause of this situation lies in the dual pressures on market supply and demand. Official data from 2014 show that China’s total production capacity for phosphate fertilizers alone reached 23.6 million tons by that year (in terms of pure P2O5), while consumption was only 12 million tons (in terms of pure P2O5). The surplus was nearly half of the production volume, a situation that proved difficult to reverse. Although there is an increasing awareness within the industry of the negative impacts of overcapacity on the market, the pace of capacity expansion for ammonium nitrate in various regions has also begun to slow down over the past two years. However, according to the Golden Island Budget, during the period 2015–2017, China’s total production capacity for monoammonium phosphate is expected to reach 19.37 million tons, while the production capacity for diammonium phosphate is set to reach around 20 million tons. But all we can do for now is ensure that the base figure does not grow too rapidly; achieving the goals of reducing production capacity and adjusting the structure is a long-term process. Looking back, with the successive abolition of various preferential electricity and freight rates for fertilizers this year, and the VAT on fertilizers, which had been in effect for a long time, coming back into play once again, this also demonstrates the **determination to promote the marketization of the fertilizer industry. But it is obvious that for fertilizer companies, behind the implementation of various policies lie high additional production costs. Before 2008, manufacturers might have been able to pass these costs on smoothly to downstream parties, and ultimately to farmers, but as market choices increased and profits from cash crops declined, this approach eventually became nothing more than a wishful thinking on the part of manufacturers. Recent data from the China Fertilizer Industry Association show that phosphorus fertilizer prices increased from January to September compared to last year, but they remain below the average prices of 2013. Especially after the introduction of value-added tax, the average price per ton of diammonium phosphate for large-scale enterprises increased by 130 yuan. The profit of the phosphate fertilizer industry in the first 8 months was approximately 1.49 billion yuan, with value-added tax alone accounting for about 1.2 billion yuan in deductions in the fourth quarter. As the winter storage season approaches, the phosphate fertilizer industry is under various pressures. An increase in grain supply coupled with a decline in prices is an inevitable trend, and the enthusiasm of downstream users to stock up on fertilizers is significantly lower than in previous years. The predicted prices for nitrogen-phosphorus-potassium compound fertilizers for winter storage have declined to varying degrees compared to previous years. As a result, the industry can only place its hopes on policy measures; hence, the proposal for zero tariffs on fertilizers emerged at this time. However, formulating such a policy requires taking into account the interests of various parties – it is necessary to ensure both the healthy development of the industry and the safety of agricultural production, and this cannot be decided unilaterally.