The fertilizer market has also entered a new normal of development
The recently held Central Economic Work Conference demonstrated that China's economy has entered a “new normal” from nine aspects including consumer demand, investment demand, exports, production capacity, production factors, market competition, and resources and environment. In the future, medium-to-high-speed growth, transformation of the development model, deep structural adjustment, and a shift in the drivers of development will be the basic features of China's economic new normal. Under such circumstances, the fertilizer market will also usher in a new normal.
⟦NL> Fertilizer overcapacity: In recent years, resource-rich regions such as Inner Mongolia and Xinjiang have built a large number of fertilizer plants, and China's nitrogen fertilizer and phosphate fertilizer capacity is severely excessive. By the end of 2013, China's urea production capacity had reached 80.7 million tons, an increase of 7.87 million tons over 2012, and in the first quarter of 2014, Inner Mongolia added another 2 urea plants with a capacity of 800,000 tons each. In 2014, market demand for urea (including domestic demand and exports) was about 67 million tons, with overcapacity of about 15 million tons, which led to a sluggish urea market. The overcapacity of phosphate and compound fertilizers is equally serious. As of the end of 2013, China's overcapacity rates for diammonium phosphate and monoammonium phosphate both exceeded 100%. According to industry experts: “In some areas of Guizhou, Sichuan, and Hubei, along with the development and utilization of new phosphate rock resources, a number of phosphate and compound fertilizer projects are still being invested in or planned for construction, which is intensifying overcapacity.”
The impact of exports on the market is growing. Due to severe overcapacity in domestic fertilizer production, exports have become an inevitable choice to absorb excess capacity, and the export factor is having an increasingly large impact on the fertilizer market. If the international market is good and export volumes are large, then the domestic market may improve; conversely, if the international market is poor or high tariffs and other reasons intervene, the domestic market cannot improve.
Fertilizer demand may see zero growth or decline. With the improvement of scientific fertilization levels and the advancement of urbanization, the growth rate of fertilizer demand will slow markedly in the future, and some places will see zero growth or even decline. Recently, the Ministry of Agriculture also clearly set the goal: to achieve zero growth in pesticide and fertilizer use by 2020.
Farmers' fertilizer use structure is changing. With changes in agricultural planting structure and the extensive use of mechanization, farmers' fertilizer use structure is also changing. In the past, farmers used more low-concentration fertilizers; now they tend to prefer fertilizers with high concentrations and good slow- and controlled-release effects, which save both time and labor. In the past, farmers used more ordinary fertilizers; now water-soluble fertilizers, organic-inorganic compound fertilizers, biological fertilizers, and other new types of fertilizers are increasingly favored.
Compound fertilizer is becoming a trend. In the past, farmers used more single-element fertilizers such as urea, ammonium bicarbonate, superphosphate, and potassium chloride; now most use compound fertilizers, because applying a compound fertilizer once is equivalent to applying all three fertilizers - nitrogen, phosphorus, and potassium - at once, and the utilization rate is higher than that of single-element fertilizers. Over the past 20 years, the growth rate of compound fertilizer application in China has been significantly higher than the growth rates of nitrogen fertilizer, phosphate fertilizer, and total fertilizer application. In 1980, China's fertilizer compounding rate was only 2.1%, rising to 13.2% in 1990, 22.1% in 2000, and further steadily rising to 32.3% in 2010. China's fertilizer compounding rate has been continuously increasing, and is expected to exceed 50% in the future.
Soil testing and formula fertilization is being greatly advanced. Agricultural production cannot do without fertilizers, but excessive fertilizer application not only causes waste of resources but also pollutes the environment. Under such circumstances, soil testing and formula fertilization based on soil characteristics and crop fertilizer requirements has become the best choice. According to statistics from agricultural departments, in the first half of 2014, the amount of formula fertilizer used for major grain crops nationwide was 5.3 million tons (in pure nutrient terms), with an application area of 360 million mu-times, an increase of 17.8% and 20% respectively over the same period in 2013; formula fertilizer has accounted for about 40% of the total fertilizer applied to major grain crops.