Overview and Prospects of the Compound Fertilizer Market       


By Liu Bin, China National Chemical Information Center    

Analysis of the market in 2009

In 2009 the compound fertilizer market in China remains in the doldrums entered in the second half of 2008 and lacks vitality.

1. Output downturn and slack market   
There is a lack of confidence in the compound fertilizer market in 2009. Some regions have a serious supply surplus. The overall market status is no briskness in the boom and greater slackness in the off-season. The compound fertilizer sector in China has only a few large competitive enterprises but numerous small enterprises with high energy consumption and outdated production processes. The serious market chaos arising from this situation has restricted the development of large enterprises, reduced the sector's degree of concentration and affected the competitiveness of compound fertilizer producers in the international market.
   Most compound fertilizer producers started to suspend or reduce production at the end of 2008. A small peak of fertilizer application appeared from February to March 2009 and producers' operating rates increased. With impacts from high inventory and high cost afterwards, however, producers have to suspend or reduce production to avoid market risks. The output of compound fertilizers in 2009 will inevitably fall.

2. Price slide
The price of compound fertilizers in China all went way down from September 2008. Take 45% sulfur-based compound fertilizers for instance. The price dropped from RMB3 600-3 700 per ton in September 2008 to RMB1 800-1 900 per ton in November 2009 with a frightening reduction margin of around 50%.
   Nitrogenous fertilizers, phosphate fertilizers and potash fertilizers are both important raw materials and strong competitors for compound fertilizers. This contradiction is especially prominent in 2009. As the flexibility of price adjustment for nitrogenous fertilizers, phosphate fertilizers and potash fertilizers is much higher than compound fertilizers, when the adjusted prices of ingredients are rolled into price of compound fertilizers, it has already lost the optimal chance for sales. In addition, in a slack market, farmers often make compare options and buy single-component fertilizers to blend themselves because the price of single-component fertilizers is similar to compound fertilizers and the nutrient content is much higher. For example, the compound fertilizer market is affected by DAP (diammonium phosphate) and had slack sales in 2009.

3. Imports up and exports down
The amount of compound fertilizers imported to China from January to November 2009 was 1.194 million tons, an increase of 139.3% over the same period of 2008. The main reason is that the high price of compound fertilizers in the international market in 2008 forced usually stable domestic users to give up using them, while the price drop of compound fertilizers in the international market in 2009 has led to a remarkable increase of the import volume. Due to impacts from the price drop and the slack demand for compound fertilizers in the international market and the change of export tariff policies in China, the amount of compound fertilizers exported fell in 2009. The total export volume was around 15 000 tons from January to November 2009. This also reflects the slackness of the global fertilizer market to a certain extent.

Prospects for 2010

After enduring the slack market, the compound fertilizer sector is becoming mature and sober. A series of policies issued by China will promote the development of the compound fertilizer sector. A sober attitude toward the market and rational development of the sector will be the development mode of the compound fertilizer sector in 2010.

1. Analyze the market calmly
Most producers and dealers are busy disposing of inventory today and will only start large-scale winter reserves after autumn harvest and sowing. The price of compound fertilizers is basically stable now, but expecting a projected price drop, buyers mostly take a wait-and-see attitude.
   With favorable factors such as further reform of the fertilizer distribution system, the adjustment to the industrial mix, the unfolding of fertilizer application according to formulation based on soil test and the price increase of grain reserves, a sound market will be established for the development of the compound fertilizer sector.

2. Adjust industrial distribution
Huge production capacity and the undifferentiated products have constrained the development of the compound fertilizer sector in China. In 2010 or even several years afterwards, unilateral capacity expansion will not be supported. Optimizing processes, upgrading products, extending industrial chains and enhancing flexibility of enterprises in market competition will be the development orientation of the compound fertilizer sector.