Stable Development of Phosphate Fertilizer Sector

The rapid growth of China's economy in recent years gave rise
to a sound external environment for the development of the
phosphate fertilizer industry. With quite a few state
agricultural incentives, the initiative of farmers in grain
production is much higher, and consumption of phosphate
fertilizers has increased constantly. So the phosphate
fertilizer industry has developed rapidly. In accord with WTO
commitments, China opened wholesale and retail sales to foreign
companies on December 11th, 2006. Domestic phosphate fertilizer
producers now face new opportunities and challenges.

Stable output growth  

The phosphate fertilizer industry in China developed steadily
in 2006. According to statistics made by China Phosphate
Fertilizer Industry Association, the total output of phosphate
fertilizers was 12.105 million tons (100% P2O5) in 2006
(slightly lower than the figure of 12.264 million tons published
by the National Bureau of Statistics of China because China
Phosphate Fertilizer Industry Association only tracked the
output of its members), an increase of 7.6% over 2005. Growth
was slower than that during the Tenth Five-year Plan period
(2001-2005). The output of high concentrated varieties was 8.20
million tons, accounting for 67.8% of the total. The output of
monoammonium phosphate (MAP, physical quantity) was 6.939
million tons, an increase of 24.1% over 2005. Domestic products
occupied a higher market share. The market share of DAP
(di-ammonium phosphate) produced in China reached 90.2%.
   The production of phosphate fertilizers was more
concentrated in 2006. The output of phosphate fertilizers in
four phosphorus producing regions (Yunnan, Guizhou, Sichuan and
Hubei provinces) accounted for 58% of the national total, being
3.0 percentage points higher than 2005. In the next few years,
several large enterprise groups will be formed in the phosphate
fertilizer sector through restructuring. In this way
competitive edge will be further enhanced.

Drastic import reduction

Import of DAP and NPK (nitrogenous, phosphorus and potassium
compound fertilizers) declined rapidly and the market share of
high concentrated varieties produced in China increased
further.

Profit rate downturn

There were 1 243 phosphate fertilizer producers (members of
China Phosphate Fertilizer Industry Association) in China in
2006 with a total employment of 260 000 persons - an increase
of 2.8% over 2005. The total industrial added value was RMB28.15
billion - an increase of 6.4%. The sales revenue was RMB124.2
billion - an increase of 19.9%. The profit was RMB5.72 billion
- an increase of 1%. Due to the price rise of phosphate rock,
the increase of freight rates and the price of MAP and NPK falling
lower than 2005 prices most of the time, profits fell in the
phosphate fertilizer sector.
   Some problems remain in the development of the phosphate
fertilizer industry today. The supply of phosphorus resources
is still tight, and China exports great quantities of phosphate
rock each year. According to statistics of the Ministry of Land
Resources, recoverable phosphate rock reserves in China were
1.89 billion tons at the end of 2003 but dropped to 1.44 billion
tons in 2005, a reduction of 450 million tons within two years.
Also there are problems such as heavy dependence on incentive
policies, low extent of intensive production and low level
redundant construction, and transportation difficulties have
become a bottleneck for the sector.
   The growth of phosphate fertilizer output will slow down,
product cost will increase and economic performance will decline
in 2007. It is expected that phosphate fertilizer output will
reach around 13.0 million tons (100% P2O5) in 2007 and high
concentrated varieties will account for 70% of the total.

Import and Export of Major Phosphate Fertilizer
Varieties in China in 2006                (thousand tons)
Variety    Import    Growth(%)    Export    Growth (%)
    (physical quantity)        (physical quantity)    
DAP     1 439    -17.7          786          9.5
MAP     20       -63.8          475        119.2
NPK     1 952    -14.6          195         52.6
SP      -       -          830         -1.2
Source: CNCIC