In the first half of this year, the fertilizer market in China has shown a rather bleak outlook. Prices for nitrogen, phosphorus, and potassium have been on a steady decline, with both retailers and farmers showing little interest in purchasing. The export sector is also struggling, further contributing to the overall downturn.
One of the main reasons behind the sluggish performance of the domestic single fertilizer market is overcapacity. It’s reported that the production capacity of diammonium and monoammonium phosphate exceeds actual demand by more than 50%. According to data from the National Bureau of Statistics, urea output in China from January to April reached approximately 24 million tons, marking a nearly 14% increase compared to the same period last year. To manage excess inventory, local producers have turned to exports or even used Jigang (a state-owned logistics company) as a strategy. By mid-May, Yantai Port had already stored nearly 2 million tons of urea bound for Hong Kong. Meanwhile, countries like those in the Middle East are leveraging their resource advantages to expand production of ammonium phosphate and urea, leading to a global buyer’s market where prices are largely dictated by India.
On a broader scale, the economic environment—both domestically and internationally—has been weak. Raw material prices at the upstream level remain low, while downstream demand is not robust. Additionally, the government's land transfer policy has introduced uncertainty into the fertilizer market, causing a more chaotic landscape after a period of restructuring. Sales patterns have shifted, and the traditional off-season is no longer clearly defined. Retailers are not motivated to buy in advance due to low prices during the off-peak season, and many prefer to purchase only when needed. This has led to increased inventory pressure, highlighting the ongoing imbalance between supply and demand. Various forms of price adjustments have accelerated a process of natural selection, making it inevitable for larger players to absorb smaller ones.
To move forward, China’s chemical fertilizer industry must focus on three key areas: increasing industrial concentration, optimizing product varieties, and promoting technological innovation. First, a scientific and rational market access and elimination mechanism should be established to drive efficiency, environmental sustainability, and energy conservation. Second, efforts should be made to enhance industrial concentration and restructure the chemical fertilizer industry. Finally, farmers should be guided to scientifically analyze soil and crop conditions to implement precise fertilization, which can improve the utilization rate of chemical fertilizers while ensuring high-quality and high-yield crops.
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