Analysis of the Operational Status of China's Urea Export Market in 2014
Affected by the supply and demand situation for energy and resources, the global nitrogen fertilizer industry landscape is undergoing new changes, with nitrogen fertilizer production shifting to resource-rich areas with lower energy prices such as the Middle East and North America. At the same time, as fertilizer prices rise, fertilizer-consuming countries such as India and Vietnam are prompted to adopt self-sufficiency strategies, and some production facilities are also under construction. From 2013 to 2017, the capacity of newly built urea plants abroad will exceed 33 million tons; in China's current main export markets such as India and the United States, capacity will expand by nearly 13 million tons; and in China's current competitors such as North Africa and the Middle East, capacity will expand by 20 million tons. The release of the capacity of these plants will inevitably put enormous pressure on China's nitrogen fertilizer industry, which will face a situation of being beset by difficulties at home and abroad in the future, and urea exports will also face major pressure.
Compared with 2013, the 2014 tariff plan "loosened" fertilizer exports overall. In the process of market-oriented reform, the preferential margin of fertilizer preferential policies has decreased year by year, and further "loosening" of fertilizer exports has become a trend, which to a certain extent also eased the pressure of domestic overcapacity. Starting from January 1, 2014, China implemented a new tariff policy for the off-season and peak season: in the urea off-season (July-October), an export tariff of 40 yuan/ton was levied; in the peak season (January-June, November and December), an export tariff of 15% + 40 yuan/ton was levied.
The peak export volume in 2014 was in October, with an export volume of 1.5623 million tons and an export value of 455.3512 million USD. The export volume increased by 5% month-on-month and by 58% compared with the same period last year. October was the last month of the low-tariff window period, and the domestic market was also in the off-season for demand, so manufacturers also wanted to take as many orders as possible before exports closed. Internationally, India, due to insufficient domestic demand, tendered at the end of October to purchase 800,000 tons of small granular urea, and some distributors shipped directly from bonded zones. This tender to a certain extent provided some support to the domestic market, especially as exports were about to close.
According to customs statistics, compared with 2012 and 2013, from January to October 2014, the urea export volume was 9.6382 million tons and the export value was 8,185.5516 million USD, an increase of 47.67% compared with the same period in 2013 and an increase of 150.87% compared with the same period in 2012. In the low-tariff window period of 2014 (July-October), the urea export volume was 5.4655 million tons and the export value was 1,534.7826 million USD, an increase of 4.88% compared with the same period in 2013.
Fertilizer exports help ease the problem of domestic fertilizer overcapacity. However, with changes in the international situation, the domestic fertilizer export situation is becoming increasingly severe. To ease inventory and cash flow pressure, enterprises have no choice but to increase export efforts. But in 2013, China's fertilizer exports were consistently in a situation of increasing volume without increasing price: export volume increased by 18.96% year-on-year, while export value fell by 5.37% year-on-year. Affected by factors such as the continued increase in new capacity in 2014 and the domestic need to resolve the supply-demand contradiction through exports, urea export volume remained high. But in response to the results of India's three tenders this year, domestic producers also showed helplessness and reflection. The lowest prices in the two tenders on June 18 and July 21 were China FOB 248-249 USD/ton and 258-260 USD/ton respectively, showing an obvious intention by foreign buyers to short the Chinese market. In order to maintain domestic export order, the China Nitrogen Fertilizer Industry Association drafted the "Urea Export Self-Discipline Convention." Under unified resistance within the industry, the third tender price basically aligned with the domestic market price, but was still lower than the mainstream international market price. It can thus be seen that in export negotiations, domestic manufacturers are in a relatively passive position, which weakens their strength in international competition.
In response to the cancellation of the distinction between off-season and peak season in the 2015 tariff, with a tariff policy of 80 yuan/ton for the whole year, this may be good news for the domestic urea market. Improving the efficiency of export products, innovating export models, using actions to maintain market competition order, and enhancing the competitive position of China's urea exports in the international market are also crucial.