How can the fertilizer industry accelerate its transformation and upgrading? Understanding the situation and finding the right position are key
The current macroeconomic situation is very severe. A considerable portion of China's industries suffer from overcapacity, and the growth rate of the national economy is slowing. The impact on the fertilizer industry has already become apparent: coal prices are falling, product prices are declining, and the market is sluggish. At present, the situation of Anhui's fertilizer industry is mixed, with more difficulties and problems. It can be summarized overall as: overcapacity, sluggish market, stricter policies, and declining profits. Specifically, this involves 8 aspects: new capacity is surging, demand growth is relatively slow, and the market is sluggish; product homogenization is severe, price wars are intensifying, technological progress is limited, and product standards lag behind; price and cost are inverted, enterprises fight separately, and exports have not formed a concerted effort; technological innovation capability is not strong; enterprises face difficulties in hiring workers, and labor costs have risen sharply; enterprise management is inadequate and lacks a rigorous and meticulous style; market order needs improvement, and counterfeit and shoddy products still exist in the market, especially the phenomenon of secretly reducing nutrient content, which occurs from time to time, and oversight by relevant government departments is ineffective; national policies are stricter (environmental protection, safety, energy, taxation, freight rates, etc.).
In short, the harsh winter for the fertilizer industry has arrived ahead of schedule, and competition will become fiercer and more prolonged. What we need to do is comply with the laws of development, follow the trends, find our own position, find our own growth point, and accelerate transformation and upgrading. If transformation slows down and there is no sense of urgency, things may become very bad.
Accelerating the transformation of the development model is the guarantee for the industry's sustainable development
From the perspective of the domestic industry, the overall trend of economic slowdown has become inevitable, and supporting stable economic growth must rely on accelerating transformation and upgrading. Since the reform and opening up, Anhui's fertilizer industry has continued to develop rapidly, has already created miracles, and has achieved results that are obvious to all. However, whether viewed from international experience or from our own reality, sustained rapid development will become history, and slower economic growth is inevitable. Extensive development, low-cost labor, and disregard for ecology, the environment, energy, and other factors no longer exist.
From an international perspective, the development and utilization of U.S. shale gas and cheap oil and gas resources in the Middle East bring cost pressure, requiring fertilizer enterprises to accelerate transformation and upgrading. The U.S. “shale gas revolution” has already had a major impact on the world energy landscape, and 26 consortia worldwide as well as Chinese self-employed main businesses have already become involved. The use of cheap oil and gas resources in the Middle East will cause a huge impact on the raw material structure and technological structure of the global petrochemical industry (including the fertilizer industry). Chinese and foreign energy information shows that China has considerable shale gas reserves, but constrained by geological structures, development technology, water resources, and other factors, shale gas development will still go through a relatively long process. U.S. shale gas is converted to RMB at 0.6—1.1 yuan per cubic meter, and its urea and methanol production costs are only about 60% of China's; Middle East costs are even lower (some use associated gas from oil fields for production), with urea only 40% of China's and methanol only 30%. Some U.S. facilities that have been idle for many years are recently gradually resuming production, and a number of new projects in the Middle East will also be put into operation one after another. This is undoubtedly a huge challenge for China's fertilizer industry. Facing the cost pressure brought by international resource factors, China's and our province's fertilizer industry can only survive and develop by accelerating transformation and upgrading.
From the current situation of the industry: first, the dilemma brought by severe overcapacity requires the industry to accelerate transformation and upgrading. General Secretary Xi Jinping recently pointed out profoundly: “Overcapacity will trigger systemic danger and even crisis.” Therefore, without accelerating transformation and upgrading, the industry will find it difficult to escape its predicament. Last year, 4 nitrogen fertilizer plants in Anhui Province were eliminated due to environmental protection and safety. Second, the binding pressure of resources and the environment requires the industry to accelerate transformation and upgrading. The 18th National Congress of the Communist Party of China proposed that building a Beautiful China is necessary for realizing the sustainable development of the Chinese nation and is also an inevitable choice at a certain stage of economic and social development. Since the reform and opening up, China's economy has developed rapidly, but the carrying capacity of resources and the environment has fallen to an extremely severe level. Various types of pollution have made more and more people feel a crisis in their living conditions, and this has also triggered quite a few mass incidents. The Third Plenary Session of the 18th Central Committee also put forward requirements for deepening the reform of the ecological civilization system, emphasizing the establishment of a systematic and complete institutional system for ecological civilization and the use of institutions to protect environmental resources. The fertilizer industry has an unshirkable responsibility and obligation; otherwise, it will be difficult to meet the needs of building a Beautiful China. Furthermore, technological innovation capability is not strong, core technologies are lacking, and differentiated development products are lacking. For this reason, the industry must also accelerate transformation and upgrading.
The above analysis shows that we have entered a critical period of transformation and upgrading. Only by accelerating the transformation of the development model and effectively solving the long-accumulated structural contradictions and resource and environmental constraints can the sustainable development of the industry be guaranteed.
Seize the new opportunities for accelerating transformation
The state attaches great importance to agriculture, and policies to accelerate agricultural modernization will powerfully boost the transformation and upgrading of the fertilizer industry
First, China's grain problem has not yet been solved, and per capita grain availability is at a lower-middle level in the world.
Second, fertilizer overcapacity has already plagued the development of our enterprises. Whether urea, phosphorus ammonium, compound fertilizer, or others, all have shown severe overcapacity. China is the world's largest fertilizer producer and also the world's largest fertilizer consumer. China's urea utilization rate is only 35%, still far behind the 50%-70% utilization rate of developed countries, which also means that a large amount of nitrogen fertilizer is wasted every year. Chinese farmers spend about 200 billion yuan on purchasing chemical fertilizers. If the utilization rate increases by 10%, it would save farmers 20 billion yuan in losses each year.
Third, China's soil quality is declining. Soil erosion, impoverishment, salinization, acidification, and other causes have led to land degradation accounting for 40% of the national cultivated land area, and land quality has declined by 35% compared with the last century.
In view of the above situation, China is further increasing its emphasis on agriculture, thereby greatly stimulating farmers' enthusiasm for growing grain, and also bringing opportunities for the fertilizer industry to innovate agrochemical service models and promote industry transformation and upgrading. In accordance with the requirements of modern agriculture (especially the current and future situation of land transfer), the fertilizer industry should actively participate in the agricultural socialized service system, from fertilizer supply, fertilization, and plant protection to technology, research and development, information, and training, forming a comprehensive and fully supporting professional service chain, providing convenient agrochemical services to end users, and building services for the entire process of agricultural pre-production, production, and post-production. This will not only enhance the level of specialized production of enterprises, but also strengthen their value-added production capacity.