Integer View from China 12 July 2017 - Optimizing China’s fertilizer capacity; China’s slow release fertilizer industry - Integer
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Integer View from China 12 July 2017 – Optimizing China’s fertilizer capacity; China’s slow release fertilizer industry

Posted On: 12-07-2017 By: Grahame Turnbull

Lynn Wang, Integer’s Research Manager in China analyses the industry’s most unpredictable and complicated market in Integer’s ‘View from China’

Chinese fertilizer capacity closures could bring more new projects

By Lynn Wang – Research Manager based in China

The Chinese Ministry of Industry and Information Technology (MIIT) has announced a research programme aimed at optimizing the country’s fertilizer capacity.  As part of the programme, fertilizer capacity considered to be outdated would be forced to close but new and advanced capacity will be encouraged to expand. The government will subsidize the construction and development of more advanced capacity, if the owners are willing to switch off obsolete capacity.

According to the China Phosphate Fertilizer Industry Association, about 3 million tpy P2O5 of phosphate fertilizer capacity will be closed during 2016-2020. The China Nitrogen Fertilizer Association also reported that about 13 million tpy of urea capacity is likely to close between 2015-2020. Under the MIIT research programme, it is envisaged that overall nominal fertilizer total capacity volume won’t change significantly, despite these closures, if replacement and expansion of other capacity is encouraged and subsidized.

In general, fertilizer capacity considered to be outdated is mainly located in central cities or close to residential areas. These plants are required to be relocated because of uneconomic and emission issues. Under the research programme, these operations could see upgrades to technology and expansion of scale, moreover, the government could subsidize the relocation.

There are some examples of fertilizer producers closing obsolete operations in favour of modern larger capacity projects.

  • Henan Jinkai Yanhua closed 200,000 tpy of inefficient urea capacity, but a 600,000 tpy of new urea capacity will be finished in 2017.
  • Operations at Sinopec Fuling Chemical, a phosphate producer, were reported to be responsible for severe environmental pollution at the end of December of 2016 by CCTV, the Chinese government media. According to the local news, the company will invest about US$950 million to construct a new replacement plant. The new investment will include a 300,000 tpy industrial phosphate line, and two phosphate fertilizer production lines each with 800,000 tpy of sulphuric acid, 300,000 tpy of phosphoric acid and 600,000 tpy of DAP. At present, the company has 700,000 tpy of MAP , 350,000 tpy of DAP, 400,000 tpy of NPK and 1.3 million tpy of sulphuric acid capacity.

We are often asked, why do some industries in China have significant structural overcapacity? The main reason is excessive government intervention. For example, steel, cement and coal were strongly supported and subsidized in the past, as the government stimulated the economy through fiscal stimulus, leading to serious oversupply. Now, the government has been forced to shut down older, less efficient capacity in these industries. The position of the fertilizer industry situation is similar to that of coal and steel. However, considering that the primary objective for the fertilizer sector is to stabilize domestic fertilizer prices and protect small farmers’ interests, it seems unlikely that China would pursue policies that would lead to a substantial reduction in fertilizer capacity, which might negatively influence fertilizer price stability or availability.

Read more on Integer’s  Nitrogen Cost and Profit Margin Service, Nitrogen 10-Year Outlook Service, The Chinese Phosphate Focus Report, Phosphate Cost and Profit Margin Service and Phosphate Rock Outlook Report

A glance at the Chinese slow release fertilizer industry

By Lynn Wang – Research Manager based in China

China started to study slow release fertilizer from 1970s, about 20 years later than other developed countries in the world. After the 2000s, Chinese slow release fertilizer developed quickly. Today, Chinese slow release fertilizer consumption represented about one-third of the total consumption in the world. There are five mainstream slow release technologies in China, namely sulphur coated, inhibited, resin coated, mineral salt coated and urea formaldehyde.

Sulphur coated fertilizer has the biggest production in China. The representative company is Hanfeng Group which is the first company promoting slow release fertilizer in China. Hanfeng has five subsidiaries witch locations including Jiangsu, Shanxi, Shandong and  Heilongjiang. However, growth of the sulphur coated fertilizer market has been limited after 2015 due to rising costs caused by high sulphur prices. Sulphur coated fertilizer prices are about RMB 200-300/t higher than normal fertilizer prices. Its market size has been about 300,000 tonnes in recent years.

Inhibited fertilizer is the second biggest slow release fertilizer product in China. There are two kinds of product, namely urease inhibitor and nitrification inhibitor. Kingenta, Shikefeng and Stanley are the representative companies. The price of urease inhibited fertilizer price is the cheapest slow release fertilizer in China, only about RMB 100-200/t higher than normal fertilizer. Northeast China is the biggest consuming area of inhibited fertilizer with about 200,000 tonnes of annual consumption.

Urea formaldehyde is the first industrialized slow release agent in fertilizer around the world. However, in China, its market has been tepid during the early 2010s. Sumitomo was the only key player in China at that time. After 2015, its market size has been promoted and increased somewhat to about 100,000 tonnes after Luxi and other NPK producers joined. Urea formaldehyde fertilizer is very popular in South China, in provinces such as Guangdong and Fujian.

Resin coated fertilizer is the most expensive coated fertilizer around the world. Its sale prices are about RMB 800-1000/t more than normal fertilizer with the same content. Kingenta, Moith and Shikefeng are the representative companies in this category in China. Resin coated fertilizer market size has been about 50,000 tonnes. Mineral salt coated fertilizer is the patent of Zhengzhou University and its coated materials are inorganic salts, such as magnesium ammonium phosphate. Mineral salt coated fertilizer includes more nutrient elements without secondary pollution in the soil. However, its coated efficiency is low and the product can’t be manufactured in large scale. In general, the mineral coated fertilizer price is RMB 500-800/t higher than normal product. Both coated fertilizer product types have developed slowly with annual sales of about 50,000 tonnes.

Value Added Fertilizer Presentation (covering slow release fertilizers): We recently delivered a presentation on value added fertilizers in Asia, at the IFA Annual conference 2017. Click here to access the presentation

Read more on Integer’s Global NPK Supply, Demand and Trade Database and for more information on Integer’s Value Added Fertilizer Summit 2018


Free Download: Integer’s Fertilizer Seminar Presentations still available

Integer Research recently held seminars whilst in attendance at the IFA Annual conference in Marrakech on the 23rd May 2017. These seminar presentations addressed key issues such as drivers of costs, profitability, the outlook for supply, demand, trade, pricing, and more across all nutrients.

  • Value Added Fertilizers
  • Nitrogen
  • Phosphate
  • Potash
  • Sulphur & Sulphuric Acid
  • Bonus whitepaper

Click here here to download the presentations (you will need to fill in a very short form)

Integer has made available free concise and insightful fertilizer and chemical market outlook analysis webinars. >> Click Here to see a full list of the coverage across Nitrogen, Phosphate, Potash, Sulphur, and Sulphuric Acid

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