State Tightens Control Over New Urea and Ammonium Phosphate Capacity, Industry Voices Summarized
Recently, the General Office of the State Council issued the "Guiding Opinions on Adjusting the Structure, Promoting Transformation and Increasing Efficiency of the Petrochemical Industry," deploying work on structural adjustment and transformation and upgrading of the petrochemical industry. The Opinions point out that it is necessary to advance supply-side structural reform, actively open up markets, adhere to innovation-driven development, improve the development environment, focus on cutting overcapacity, reducing consumption, and lowering emissions, shoring up weaknesses, adjusting layout, and promoting safety, and drive the petrochemical industry to improve quality and efficiency, transform and upgrade, and develop healthily.
The Opinions clearly set out seven key tasks, including resolving overcapacity, coordinating and optimizing layout, upgrading traditional industries, safe and green development, improving the innovation system, promoting mergers and reorganizations, and strengthening international capacity cooperation. It is required to give full play to the comparative advantages of China's traditional petrochemical industry, and in conjunction withthe "Belt and Road"strategy, actively promotemethanol, chemical fertilizers, pesticides and otheradvantageous industries to carry out international capacity cooperation, build overseas industrial parks, promote chain-style transfer and intensive development, and drive related technical equipment and engineering services to "go global."
The Opinions require adhering to the combination of being grounded in the present and looking to the long term, strictly controlling new overcapacity, accelerating the elimination of backward capacity, and raising the level of green and safe development, and propose striving to resolve overcapacity. Strictly control new capacity in overcapacity industries such as urea and ammonium phosphate, and for advanced process transformation and upgrading projects that meet policy requirements, equal or reduced replacement shall be implemented.
According to Fu Xiangsheng, vice president of the China Petroleum and Chemical Industry Federation, specific implementation plans have already been formulated in support of the Opinions, clarifyingthe task requirements for cutting capacity and adjusting structure in 12 industries, including the fertilizer industry, over the next three years, and proposingelimination category, restriction category, and encouragement categoryproject lists.
The China Nitrogen Fertilizer Industry Association stated that overcapacity in the nitrogen fertilizer industry is structural overcapacity, so the focus of industry reform in the coming years will be structural adjustment (capacity structure, raw material structure, product structure, etc.) as well as industry technological progress, energy conservation and emission reduction. By 2018, urea capacity will be controlled at 76-78 million tons, of which at least 10 million tons of backward capacity will be eliminated, and the capacity utilization rate will be raised to 85%-90%. If the above goals are achieved and new capacity can achieve reduced replacement, supply and demand will reach balance. Moreover, a long-term mechanism for the exit of backward capacity must be established, strictly controlling the environmental protection gate and the energy consumption gate; any backward capacity that fails to meet national standards for pollutant emissions and energy consumption and water consumption limits shall be resolutely eliminated in accordance with laws and regulations; for enterprises with many difficulties in production and operation and with capacity utilization rates and sales profit margins lower than the industry average, they shall be gradually guided to voluntarily exit.
For the phosphate fertilizer industry, the industry is likewise in a critical period of structural adjustment and transformation and upgrading,although China's self-sufficiency rate has reached more than 140%, part of it is imported every year.The China Phosphate and Compound Fertilizer Industry Association believes that solving overcapacity mainly still depends on the combined effect of market means and government regulation.
Mao Zixue, executive deputy general manager of Henan Energy and Chemical Industry Sales Company, said that at present the fertilizer industry's capacity reduction has reached a critical period. Whether in the nitrogen fertilizer or phosphate fertilizer industry, affected by overcapacity, the industry as a whole is suffering serious losses. Especially for the nitrogen fertilizer industry, if backward capacity cannot be effectively eliminated, it also affects the commissioning of advantageous capacity. This Opinions clearly states that for advanced process transformation and upgrading projects that meet policy requirements, equal or reduced replacement shall be implemented, which will help the industry accelerate capacity reduction. In addition, in terms of improving the innovation system, expand the scope of smart manufacturing pilots in the petrochemical industry, encourage the refining and chemical, fertilizer and other industries to carry out pilot projects for smart factories and digital workshops, build energy management information systems, and enhance enterprises' refined management capabilities. This also sets higher requirements for the development of the fertilizer industry.
For details, please see China Agricultural Means of Production, August 12, 2016, page 1
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