According to statistics, in October, the domestic fertilizer market remained sluggish. The average price of urea market in October was about RMB 1,760/ton, a decrease of 1.7% from the previous month and a year-on-year decrease of 2.2%. Although the urea export tariff rate has dropped from 30% to 15% since October, due to the recent weakening of the international urea market, the export of enterprises is not too many, and the decline in tariffs does not play a significant role in supporting the domestic market.
According to the analysis, the operating environment of the fertilizer industry in China is not optimistic.
First of all, from the analysis of supply and demand in recent years, the current annual growth rate of global fertilizer production is about 2%-3%, while China's growth contribution rate is 40%-60%. In 2004, the growth rate of China's domestic fertilizer production was 15%. Although it decreased in 2005, it still reached over 10%. The monthly growth rate in 2006 was above 15%. Looking at the current situation, this development momentum will continue for at least 1-2 years. However, domestic fertilizer demand is not optimistic. There are several main reasons: First, the farmland is reduced. In the past 10 years, the area of ​​farmland in China has been reduced by 1 billion mu. With the implementation of projects such as returning farmland to forests, returning farmland to grassland, and returning farmland to lakes, the area of ​​farmland will only decrease in the future and will not increase. This situation will affect fertilizers. demand. Second, although the enthusiasm of farmers for grain growing has been greatly mobilized, it does not fundamentally solve the problem of peasants fighting poverty and getting rich. In the short term, the domestic demand for chemical fertilizers has increased, but it does not have continuity. Third, with the country's emphasis on agricultural protection technology, especially the promotion of formula fertilization and balanced fertilization, the possibility of a substantial increase in the amount of chemical fertilizers continues to be very small.
Second, the domestic fertilizer companies face the pressure of rising costs. There are three main types of nitrogenous fertilizers, natural gas, petroleum, and coal. The prices of these three kinds of resources in China are relatively high. On December 26, 2005, the National Development and Reform Commission announced the natural gas price reform program, with the ex-factory price of natural gas for chemical fertilizers per thousand cubic meters. Raise 50-100 yuan. At the end of October this year, the domestic oil giants have submitted a plan to apply for LNG (liquefied natural gas) prices to the National Development and Reform Commission. It is understood that the current plan of the National Development and Reform Commission is to gradually increase the annual LNG price by 5%-8% until it is roughly in line with the international level; and the price of coal for urea production has increased five-fold in four years. In some places, this is not the case. The rate of increase. As the coal price has been liberalized, the price of anthracite lump has increased from about 150 yuan in 2002 to 260-300 yuan in 2003. It has further risen to 400-510 yuan in 2004 and it has risen to more than 500-600 yuan in 2005. At present, some companies have even reached the factory price of up to 800 yuan. From the perspective of raw material cost, the cost of coal in a ton of urea accounted for 50%, which means that the price of coal rose by 200 yuan and the cost of urea rose by 100 yuan.
Again, from the perspective of industry policy, the cancellation of administrative intervention has a negative impact on the fertilizer industry. The fertilizer industry is gradually implementing market-oriented reforms, which are embodied in the following ways: to protect the interests of farmers through direct subsidies; to regulate fertilizer prices in the market, to phase out interventions; that is, to reduce the government’s direct intervention in fertilizer market prices; and to promote the health of the fertilizer industry. Development will create a level playing field for fertilizer companies. According to industry analysts, from the current perspective of supply and demand, the urea and phosphate fertilizer industries are in a condition where supply is slightly greater than demand, so the marketization of chemical fertilizer prices will not lead to an increase in prices, while fertilizer companies currently enjoy VAT exemption. The preferential policies for natural gas, preferential price of gas, transportation and electricity price may be cancelled, which will affect the profitability of fertilizer companies.
Finally, Chinese fertilizer companies will face challenges in market opening. From December 11th, 2005, China allowed foreign companies to set up fertilizer companies in China. From December 11th, 2006, foreign companies were allowed to set up fertilizer companies. At present, foreign large-scale fertilizer companies, such as the American Cargill Corporation and the Russian Akon Company, have begun to penetrate the Chinese market. An industry source stated that foreign companies entering the fertilizer market will be a huge shock to Chinese fertilizer companies, especially nitrogen fertilizer companies. The cost of producing fertilizers by foreign companies is relatively lower than that in China. In Russia where the fertilizer production industry is relatively developed, natural gas and oil resources are abundant, and the cost is much lower than that of China. The outlook for the domestic fertilizer industry is worrying.
According to the analysis, the operating environment of the fertilizer industry in China is not optimistic.
First of all, from the analysis of supply and demand in recent years, the current annual growth rate of global fertilizer production is about 2%-3%, while China's growth contribution rate is 40%-60%. In 2004, the growth rate of China's domestic fertilizer production was 15%. Although it decreased in 2005, it still reached over 10%. The monthly growth rate in 2006 was above 15%. Looking at the current situation, this development momentum will continue for at least 1-2 years. However, domestic fertilizer demand is not optimistic. There are several main reasons: First, the farmland is reduced. In the past 10 years, the area of ​​farmland in China has been reduced by 1 billion mu. With the implementation of projects such as returning farmland to forests, returning farmland to grassland, and returning farmland to lakes, the area of ​​farmland will only decrease in the future and will not increase. This situation will affect fertilizers. demand. Second, although the enthusiasm of farmers for grain growing has been greatly mobilized, it does not fundamentally solve the problem of peasants fighting poverty and getting rich. In the short term, the domestic demand for chemical fertilizers has increased, but it does not have continuity. Third, with the country's emphasis on agricultural protection technology, especially the promotion of formula fertilization and balanced fertilization, the possibility of a substantial increase in the amount of chemical fertilizers continues to be very small.
Second, the domestic fertilizer companies face the pressure of rising costs. There are three main types of nitrogenous fertilizers, natural gas, petroleum, and coal. The prices of these three kinds of resources in China are relatively high. On December 26, 2005, the National Development and Reform Commission announced the natural gas price reform program, with the ex-factory price of natural gas for chemical fertilizers per thousand cubic meters. Raise 50-100 yuan. At the end of October this year, the domestic oil giants have submitted a plan to apply for LNG (liquefied natural gas) prices to the National Development and Reform Commission. It is understood that the current plan of the National Development and Reform Commission is to gradually increase the annual LNG price by 5%-8% until it is roughly in line with the international level; and the price of coal for urea production has increased five-fold in four years. In some places, this is not the case. The rate of increase. As the coal price has been liberalized, the price of anthracite lump has increased from about 150 yuan in 2002 to 260-300 yuan in 2003. It has further risen to 400-510 yuan in 2004 and it has risen to more than 500-600 yuan in 2005. At present, some companies have even reached the factory price of up to 800 yuan. From the perspective of raw material cost, the cost of coal in a ton of urea accounted for 50%, which means that the price of coal rose by 200 yuan and the cost of urea rose by 100 yuan.
Again, from the perspective of industry policy, the cancellation of administrative intervention has a negative impact on the fertilizer industry. The fertilizer industry is gradually implementing market-oriented reforms, which are embodied in the following ways: to protect the interests of farmers through direct subsidies; to regulate fertilizer prices in the market, to phase out interventions; that is, to reduce the government’s direct intervention in fertilizer market prices; and to promote the health of the fertilizer industry. Development will create a level playing field for fertilizer companies. According to industry analysts, from the current perspective of supply and demand, the urea and phosphate fertilizer industries are in a condition where supply is slightly greater than demand, so the marketization of chemical fertilizer prices will not lead to an increase in prices, while fertilizer companies currently enjoy VAT exemption. The preferential policies for natural gas, preferential price of gas, transportation and electricity price may be cancelled, which will affect the profitability of fertilizer companies.
Finally, Chinese fertilizer companies will face challenges in market opening. From December 11th, 2005, China allowed foreign companies to set up fertilizer companies in China. From December 11th, 2006, foreign companies were allowed to set up fertilizer companies. At present, foreign large-scale fertilizer companies, such as the American Cargill Corporation and the Russian Akon Company, have begun to penetrate the Chinese market. An industry source stated that foreign companies entering the fertilizer market will be a huge shock to Chinese fertilizer companies, especially nitrogen fertilizer companies. The cost of producing fertilizers by foreign companies is relatively lower than that in China. In Russia where the fertilizer production industry is relatively developed, natural gas and oil resources are abundant, and the cost is much lower than that of China. The outlook for the domestic fertilizer industry is worrying.
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