China's 2017 fertiliser
output reaches a nine-year lowest level. This shows the determination of the
government to limit the overuse of chemical agrochemicals, supported by the
policy zero growth of chemical fertilisers and pesticides by 2020.
At
the end of February, the National Bureau of Statistics of the People's Republic
of China issued the Report on
National Economy and Social Development in 2017, revealing an
overall fertiliser output of 61.84
million tonnes, a drop by 9.43 million tonnes from 2016. According to
market intelligence firm CCM, this total output hit the lowest point in the
past 9 years. The main reasons for the remarkable drop can be found in the more
stringent environmental protection inspections and higher pollutant discharge
standards, which have eliminated outmoded fertiliser capacity from the market.
Also, the supply-side structural reform has further reduced domestic capacity.
On top of that, operating rates of China's fertiliser industry remained low in
2017 because of smaller demand triggered by falling grain prices.
As
environmental protection and work safety inspections become more frequently in
China, phosphate fertiliser companies are likely to curb production. Also, the elimination of outmoded capacity will
continue in 2018, leading to balanced market supply and demand. Prices of
raw materials such as phosphorus ore and synthetic ammonia are possible to rise
in 2018. Therefore, the operating costs of phosphate fertiliser manufacturers
will keep an upward trend, forcing them to quote for higher prices. The actual
transaction prices, on the other hand, will also be determined by downstream
demand and market supply.
Along
with the fertiliser output, China’s fertiliser exports decreased as well. China
exported 2.25 million tonnes of fertilisers in Dec. 2017. In the past 12
months, China's overall fertiliser export volume and value declined by 8.9% YoY
and 7.1% YoY.
The
trend has shown the accuracy of the predictions by CCM that were made in early
2017. According to the prediction of CCM, the year 2017 would show a
significant decrease in the output, demand, as well as the export volume of
fertilisers in China. The main factor, that would have a huge impact on the
trend was the effort of China’s government in implementing new environmental
protection measurements. The reasons, that the whole market will remain on a
low level in China in 2017, have been analysed to be mainly due to the
continuing process of de-capacity.
CCM at the China
International Fertiliser Show
Our
team took part in the 19th China International Agrochemical & Crop
Protection Exhibition (CAC 2018) in Shanghai. Known to be one of the research
and opinion leaders of the Chinese agrochemicals market, CCM’s General Manager
Usman Khan has given a presentation on the first day at the 9th China
International Fertiliser Show (FSHOW 2018), that comes together with the CAC.
In the speech, he outlined the development of China’s fertiliser industry to
the crème a la crème of China’s fertiliser leaders and gave recommendations of
how to deal with the development.
Mr
Khan gave an overview of China’s fertiliser industry from 2015-2017. During
this period, the market saw year-by-year falls in fertilisers export volume
from China.
According
to Mr Khan, there are several reasons for the development. First of all, the
domestic supply and demand situation. Large quantities of obsolete production
capacities were phased out for the supply-side structural reform carried out by
the Chinese government. Preferential policies for fertiliser production were
removed and the demand fell stably, due to the Proposal to Take Actions to
Achieve Zero Growth in Fertiliser Use by 2020 unveiled by the Ministry of
Agriculture of the People’s Republic of China. Lastly, production cost was
increased because of the inspection for environmental protection mainly.
About the article
CCM
is China’s leading market intelligence provider for the fields of agriculture,
chemicals, food and feed.
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