China Market Insider China's Fertilizer Industry Continues Transformation to Higher Value Products
China's fertilizer market and production is currently stable despite the Corona crisis. Total production of nitrogen, phosphorus and potassium fertilizers was 53,958 million tons last year, down only slightly by 0.9 per cent year-on-year, according to the database of trade publication Zhongshang Qingbao Wang.
Beijing/China – The negative impact of the Corona crisis and the nationwide lockdown, which was only temporarily imposed in China, was limited to the first quarter of 2020, when daily output suddenly dropped by 20,000 tons to 125,000 tons. In the hardest-hit province of Hubei, in whose capital Wuhan the virus first spread, production had been temporarily reduced by 80 to 90 per cent in the first three months of last year. However, the Beijing headquarters had ended the nationwide lockdowns again shortly afterwards and declared that the coronavirus was under control.
"After April, fertilizer production returned to normal step by step," reports the China Petrochemical Industry Association CPCIA. This was also due to the fact that the "Covid-19 epidemic led to an increase in demand for chemical fertilizers", the association reports. Since the outbreak of the epidemic, many countries have again focused on the issue of food security and have taken measures to increase grain production.
The current market situation for fertilizers is therefore "good and prices are stable", writes CPCIA. At the turn of the year, the price of urea ex-factory in the People's Republic was about 278 dollars (1800 Chinese yuan) per ton. Monoammomium phosphate cost about 317 dollars (2,050 yuan), diammonium phosphate about 355 dollars (2,300 yuan), potassium chloride about 324 dollars (2,100 yuan) and potassium sulphate 417 dollars (2,700 yuan) per ton.
The forecast for the current year, 2021, is also good, he said. "2021 will be the year when the world fights the coronavirus, and effective food supply will continue to be a priority," analyses the Chinese Chemical Association. China, the world's largest producer, exported 26.29 million tons of chemical fertilizer last year, 3.1 per cent more than the year before.
Imports of chemical fertilizers to China fell 18.4 per cent year-on-year in 2020, which market observers attributed to the successful restructuring of China's fertilizer industry. More and more Chinese companies have started to produce high-quality fertilizers, which were previously only available through imports, they say.
Basic chemicals such as chemical fertilizers are still responsible for about 70 per cent of China's chemical industry output and for about 80 per cent of its profits, but since 2015 the Beijing headquarters has been implementing a ‘zero growth policy for chemical fertilizers and pesticides’. Fewer but higher-quality artificial fertilizers are to be produced and used in China's agriculture industry.
Under the banner of ‘agricultural modernization’, the use of traditional chemical fertilizers in China has therefore been steadily reduced by state planners for three years in a row. The reductions in both the use and domestic production of traditional nitrogen, phosphorus and potassium fertilizers are celebrated as successes by state propaganda. In the current 14th Five-Year Plan, on the other hand, the expansion of the production of ‘value-added fertilizers’ is promoted with precise targets. This refers to all high-quality special fertilizers that guarantee higher yields on the fields with reduced quantities.
Some of these value-added fertilizers contain additional nutrients such as humic acids, proteoglycans or amino acids. Agricultural yields are reportedly 14 to 17 per cent higher on average than with conventional artificial fertilizers. The total annual production of such value-added fertilizers has reached about ten million metric tons in China within a short time. This capacity is "world-leading", writes the official Chinese news agency Xinhua. In the coming years, this will remain a sector with above-average growth.
The current five-year plan specifies that China will increase annual production of value-added urea and value-added compound fertilizer to 20 million tons each within the next five years, and that of value-added ammonium phosphate to 10 million tons. "Thirty per cent of all conventional artificial fertilizers will then be modified in the direction of Mehrwehrt," writes the chemical newspaper Zhongguo Huagong Xinxi.