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Although the domestic fertilizer market generally experienced an upward trend in the first quarter of this year, prices stabilized in the second quarter, with little change in ex-factory prices for production enterprises. However, the market is expected to face oversupply in the second half of the year, making a price decline almost inevitable. In response, industry experts suggest that companies should take proactive measures to mitigate risks. These insights were shared at the National Chemical Fertilizer Price Information Seminar organized by the Yunnan Provincial Chemical Industry Association recently.
In the first half of 2024, rising costs of electricity, steel equipment, and transportation pushed up production expenses for fertilizer companies. To keep up with market demand while adhering to national policy restrictions, companies adjusted their prices to higher levels, contributing to increased market prices. Additionally, farmers, still affected by last year’s high prices, delayed purchases and stockpiled fertilizers, further inflating prices. As a result, the national fertilizer market saw a balance between supply and demand, with rising prices and strong sales performance.
According to official data, total fertilizer production (refinement) reached 26.5 million tons in the first half of the year, representing a 15.5% year-on-year increase, or a 3.8% rise compared to the same period last year. Nitrogen fertilizer output stood at 18.892 million tons, up 12.6%, while urea production reached 10.71 million tons, an increase of 11.8%.
In terms of pricing, domestic fertilizer prices rose significantly in the first quarter. For example, the ex-factory price of urea was around 1,600 yuan per ton in January, climbing to approximately 1,800 yuan by mid-March. In the second quarter, as more fertilizer products entered target markets, market saturation helped stabilize prices to some extent. Prices in northern China continued to rise, while southern regions remained flat or saw slight increases. By mid-June, prices in the south declined slightly due to seasonal usage, while northern prices fell sharply.
Looking ahead, the Chinese fertilizer market is expected to face oversupply conditions in the second half of the year. Experts predict that price declines are unavoidable, although the pace remains uncertain. Key factors driving this trend include the new production capacity added in 2005, which will increase urea output by about 1 million tons, the end of the agricultural season reducing fertilizer demand, and the government's ongoing promotion of soil testing and formula fertilization, covering 280 million mu of land and potentially reducing nitrogen fertilizer use by over 7.8 million tons.
Experts also note that China’s fertilizer industry is still in a phase of rapid growth. Several major urea projects under construction will come online, leading to potential oversupply. According to incomplete statistics, new urea capacity is expected to reach 5.76 million tons in 2006, with an additional 80 million tons planned by 2008. The Ministry of Agriculture aims to implement soil testing and formula fertilization on 900 million mu of farmland, reducing annual nitrogen fertilizer use by over 11 million tons.
To address these challenges, experts recommend that companies focus on optimizing product structures, prioritizing basic fertilizers like DAP and MAP, and NPK compound fertilizers. They also advise against expanding outdated technologies such as TSP and NP, and instead promote market-driven elimination of inefficient and polluting facilities. Resource allocation should be optimized, and policies like “mineral-fertilizer integration†and “salt-fertilizer combination†should continue to prevent over-investment and redundant expansion.
Furthermore, enterprise restructuring is essential to build large-scale groups, enhance industrial concentration, and boost international competitiveness. Technological innovation must be accelerated, with a focus on developing new fertilizer types and improving production efficiency. Lastly, the industry should embrace sustainable development, clean production, and environmentally friendly practices to ensure long-term economic, social, and environmental harmony.