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The cost pressures aggravated “We have not produced chemical fertilizers, and related equipment is almost sold out.†Ms. Wang of Zibo Xinyu Office told the reporter that a few months ago, the company decided to stop production of chemical fertilizers and carry out industrial restructuring. Zibo Xinyu will continue to use for decades. Fertilizer Group changed its name to Zibo Xinyu Group. As for the reason for the conversion, her explanation is: “The price of raw materials for the production of chemical fertilizers continues to rise, and the fertilizer industry is open to foreign investors. The days of fertilizer companies are getting saddened.â€
It is understood that the main product of China's fertilizer companies is nitrogen fertilizer, and urea, as the mainstream nitrogen fertilizer, is mainly produced from coal, oil and natural gas. Coal accounts for nearly 70% of the raw material costs for urea, and anthracite accounts for 80% of the raw material costs for small companies. However, the prices of oil, coal and natural gas have continued to rise in recent years. Data show that the price of anthracite coal in 2003 was 260-300 yuan / ton, by the first half of 2006, its price has reached 800 yuan / ton. In terms of natural gas, the National Development and Reform Commission has planned to increase 5% to 8% each year until it is roughly in line with international price levels. This has greatly impacted the production of nitrogen fertilizers using natural gas as raw materials.
"Especially allowing foreign investors to enter the fertilizer market is a big impact on China's chemical fertilizer companies, especially circulation-oriented enterprises." Tang Qiming, deputy secretary-general of the Shandong Agricultural Society, analyzed, December 11, 2006, China's fertilizer industry wholesale, retail The market began to fully open to foreign investment and the price of chemical fertilizers was also abolished. “Predictably, fierce competition from foreign capital will come. In addition, the government’s gas prices, electricity prices, railway freight rates, and exemptions VAT and other preferential measures will also be phased out, and the profits from fertilizer production will become thinner and thinner."
Some experts predict that only the cancellation of the preferential electricity tariff for small nitrogen fertilizers will increase the cost of urea by 100 yuan to 150 yuan per ton. In terms of chemical fertilizer transportation, China's fertilizer consumption market is extremely fragmented. Take phosphoric acid manufacturers, 46% of which are located in phosphate-free provinces. After the cancellation of the country's preferential policies, the decentralized market layout will increase the company's transportation costs.
Fertilizer industry is now open to foreign investment for two months. Although there have been no large-scale foreign investment in cities, large foreign fertilizer companies such as Cargill and Russia Akon have already penetrated into the circulation of fertilizers in China. At present, foreign-funded enterprises have set up fertilizer retail companies in some areas of China, and some have even set up fertilizer wholesale companies. "The cost of producing fertilizers for many foreign companies is relatively lower than China because the main raw materials for nitrogen production are natural gas, petroleum, and coal. The prices of these three kinds of resources are relatively high in China. The fertilizer industry is more developed in Russia, natural gas and oil. The resources are abundant and the cost is much lower than our country.†People in the industry are concerned that domestic chemical fertilizer companies will lose their cost advantage in dancing with wolves.
Supply-demand conflict is difficult to change. The reporter noted that at present, there are many new projects for chemical fertilizers and projects under construction, and the production capacity of chemical fertilizers has increased rapidly, which is higher than the increase in demand for agricultural production. According to the data, 2006 is the fastest growing year for urea production capacity, and domestic production capacity will expand during the “Eleventh Five-Year Plan†period. In 2007, the production capacity may exceed 50 million tons, and this figure will be far greater than the total domestic demand. Coupled with the country's restrictions on the large number of domestic urea exports, the export tax rate will continue to be maintained at 30%, the contradiction of supply exceeding demand will be a period of time the domestic fertilizer industry is facing a major pressure. At this point, if there are further foreign products squeezed in, the situation of domestic fertilizer production enterprises will reshuffle the situation.
According to the relevant person of the Shandong Chemical Fertilizer Industry Association, the province's newly added urea production capacity reached 2.03 million tons last year, an increase of 31% compared with the beginning of the year; in 2007, Shandong will also have a production capacity of 1.85 million tons, which is not yet including planning, Design stage device. Therefore, Shandong's total urea production capacity will soon exceed the 10 million tons mark. “In Shanxi and Henan provinces, the new production capacity is equally strong, coupled with the large-scale fertilizer facilities under construction, the situation of urea oversupply will be very serious. At the same time, with the liberalization of the fertilizer wholesale and retail markets, foreign high-quality fertilizers will enter the market. Will directly lead to the bankruptcy of many domestic SMEs."
In contrast, the domestic market is not optimistic: the reduction of farmland will inevitably affect the demand for chemical fertilizers; excess fertilization has already occurred in most areas of China; the water pollution in the Yangtze River Basin, North China Plain rivers and lakes is obvious, and the direct result of food production increase and fertilizer costs are diminishing returns. Phenomenon, resulting in a decline in farmers' enthusiasm for fertilization; with the popularization of soil testing, balanced fertilization, China's fertilizer application rate is significantly less likely to increase.
In addition, the domestic fertilizer industry is also facing the issue of circulation system reform. Due to the foreign chemical product value chain, its composition is generally the upstream gas field (mine) - manufacturing - retail three links, and most of the domestic to go through the gas field - manufacturing - wholesale - distribution - retail five links, making the fertilizer circulation costs more High, the competitive disadvantages suddenly appear.
Chen Yuhui, an analyst at Orient Securities Industry, pointed out that factors such as aggravated cost pressures and competition with foreign investment, similar to Xinyu, Tianrun, and many other small and medium-sized fertilizer companies will face many pressures, and transformation or bankruptcy will become their reality's helpless choice. In the future, the fertilizer industry may adopt a reorganization of assets to form a group of large-scale production and marketing-type marketing enterprise groups, and at the same time update the business philosophy, it is possible to resist various external impacts.
Cost pressures aggravate foreign capital competition
The cost issue is increasingly becoming an unbearable burden for most small and medium-sized fertilizer companies in China. Cases like Xinyu and Tianrun, which are converting or even stopping production, will not be the case. In the future, more small and medium-sized fertilizer companies will follow suit.