Development and problems coexist – what is the future path for the nitrogen fertilizer market?

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Development and problems coexist – what is the future path for the nitrogen fertilizer market? Author/Source: Agri-Market Report Date: 2016-11-14 Clicks: 3 Looking at the current situation and future prospects of China’s nitrogen fertilizer industry, the sector still faces both opportunities for development and various challenges. Analyzing the spring plowing market in 2017: What lies ahead for the nitrogen fertilizer market? 　　Status Quo 1: Rapid growth in production capacity, with a prominent issue of overcapacity. During the 12th Five-Year Plan period, China’s urea production capacity increased by 28.4 million tons, with a growth rate of 4.5%. While new production capacity continued to rise, the phasing out of outdated production capacity progressed more slowly; as a result, the problems caused by overcapacity remain quite severe. 　　In 2016, the national production of nitrogen fertilizers was around 82 million tons, while the total demand from industry and agriculture was about 57 million tons. An excess production of 25 million tons is indeed an astonishing figure. It was this excess production of 25 million tons that significantly reduced the market prices of nitrogen fertilizer products; the drop in prices led some companies to fall into a price war scenario, thereby causing chaos in the overall market. 　　Status Quo 2: Increased scale of production facilities 　The trend toward larger-scale operations among domestic nitrogen fertilizer manufacturers is now a fact recognized by the entire industry. An increase in the scale of nitrogen fertilizer production facilities contributes to the stability of product quality. 　　As is well known, anti-counterfeiting efforts in the agricultural inputs industry hardly target nitrogen fertilizer manufacturers, and this is because the production process for nitrogen fertilizers is complex and involves high costs. Nevertheless, there are still a certain number of small nitrogen fertilizer manufacturers in the country. The quality of their products is often unreliable, and these companies are adept at engaging in price wars, which has a negative impact on the stability of the overall market. 　　Status quo 3: Industrial structure adjustment must continue. 　As for the industrial structure adjustment in the nitrogen fertilizer industry, it is indeed not easy to conduct an analysis at present; however, only through comprehensive industrial structure adjustment can nitrogen fertilizer companies be saved from dire straits. 　　In addition, although certain progress has been made in energy conservation and emission reduction among various nitrogen fertilizer manufacturers, these companies still face significant environmental pressures; the pollution caused by dust, wastewater, noise, and other factors is a serious issue for many of them. “During the 13th Five-Year Plan period and beyond, structural adjustment and environmental protection will remain significant challenges for nitrogen fertilizer manufacturers. 　　Prediction: Urea prices are likely to continue falling. Entering 2016, driven by factors such as the sharp drop in international oil and grain prices, nitrogen fertilizer prices declined sharply. According to statistics from the China Nitrogen Fertilizer Industry Association, in the third week of January 2016, the average ex-factory price of urea across the country was 1,313 yuan per ton, a decrease of 33 yuan per ton on a month-on-month basis, and a decrease of 267 yuan per ton on an annual basis. This year, losses in the urea industry will continue to increase, and the continuous decline in nitrogen fertilizer prices has led to a reduced willingness to stock up for winter use in the distribution sector. 　　Many industry experts believe that due to the low levels of fertilizer stockpiles in the current market and the tight logistics conditions during the Spring Festival travel season, demand for fertilizers for spring plowing is beginning to rise. As a result, nitrogen fertilizer sales will face challenges related both to logistics and supply issues, and the concentrated purchasing of fertilizers for spring plowing will further increase the difficulties in meeting supply needs. Nevertheless, since the early part of winter, the prices of nitrogen fertilizers this year have remained stable, with prices fluctuating only slightly on a downward trend throughout the year. 　　Breaking the deadlock: Multiple measures taken to achieve \"zero growth\" in production capacity. From the perspective of nitrogen fertilizer marketing, consumption of nitrogen fertilizers is growing steadily both domestically and internationally, but there is not a strong awareness within the industry of the need for \"zero growth\" in production capacity. To put the nitrogen fertilizer industry on a sound development track, it is essential to firmly establish an overall perspective of \"zero growth\" in production capacity. 　　Furthermore, domestic nitrogen fertilizer exports are currently increasing significantly, yet the key role of various enterprises has not been fully utilized. Such a requirement might be too much to ask of current nitrogen fertilizer companies, as due to the factors related to export prices, it is quite difficult for them to play an active role. 　　Looking at the overall situation, the nitrogen fertilizer industry is characterized by being \"large but not strong, numerous but not profitable.\" To break this situation, it is necessary to strengthen oversight of the nitrogen fertilizer industry, and companies must also actively carry out structural adjustments. (Song Anyong)