Artificial Intelligence
How to treat the status quo of China's phosphate fertilizer industry
China's phosphate and compound fertilizer industry has experienced rapid growth over the past decade, achieving a high level of self-sufficiency in the domestic market. However, the question of whether the industry should expand internationally remains a topic of debate, especially with the introduction of export restrictions by the government. This has led to significant discussions within the sector.
For more than ten years, the industry has seen remarkable development, reaching a peak in 2005 when the self-sufficiency rate surpassed 95%. The year 2006 marked a turning point, as high-concentration compound fertilizers began to meet both the quantity and structural needs of the domestic market. By June 2007, China transitioned from being a net importer to a major exporter of phosphate fertilizers. In that year alone, exports of diammonium phosphate reached 2 million tons, while monoammonium phosphate exceeded 1.4 million tons, establishing China as a key player in the global market.
This shift brought about dramatic changes in both domestic and international markets. Particularly after February of this year, the price of high-concentration phosphate fertilizers, such as diammonium phosphate, saw a sudden and significant increase—rising over 87% from $250 per ton to $420 per ton. This was the most substantial price change in 50 years, drawing global attention. The focus has been on understanding the reasons behind the price hike and assessing how long this trend can be sustained. These issues are critical for the future of China’s phosphate and compound fertilizer industry.
The primary cause of the price surge is demand-driven, but the price changes in China are also influenced by raw material costs. More importantly, the industry is concerned about its long-term development. China currently produces the largest volume of phosphate fertilizers globally, and its structure has undergone major transformations. Ten years ago, there were over 1,100 phosphate fertilizer companies, but today, only 58 monoammonium phosphate producers remain, each producing more than 50,000 tons. The industry has become more concentrated, with the emergence of large enterprises driving integration and accelerating the consolidation process.
Despite claims that China will face a severe phosphorus resource shortage, recent geological surveys indicate that China holds the world’s largest phosphorus reserves. The Ministry of Natural Resources has listed phosphorus among the 20 resources critical to the country’s sustainable development post-2010. However, many have overlooked this fact. China’s geological data is outdated, dating back to the 1990s, while the U.S. Geological Survey recently reported that China now ranks first in global phosphorus resources. Additionally, advancements in beneficiation technology suggest that China is unlikely to face a phosphorus shortage, allowing the industry to sustain itself for centuries.
Misunderstandings about phosphorus resource availability could significantly impact corporate strategies. It is essential for relevant government departments to reevaluate phosphorus resource positioning and reach a consensus to guide the industry’s future development. This is crucial for the continued growth of China’s phosphate and compound fertilizer sector.
In my view, the industry must first ensure domestic demand before looking to international markets for expansion. Limiting phosphate fertilizer exports under the guise of resource protection risks missing a golden opportunity for development. According to WTO principles, no country should restrict resources in the name of trade. Therefore, the industry must integrate more closely with the global market and take the next step forward.
Phosphate fertilizer companies are currently facing challenges. We hope that relevant authorities will address these issues systematically to avoid hindering industry progress. When domestic demand is met, it’s time to rethink how the industry can grow stronger. Learning from successful models in developed countries would be beneficial.
The government emphasizes the concept of scientific development, promoting a circular economy and resource recycling. As a raw material enterprise, we must continue on this path. As upstream producers, we rely on distribution and downstream partners. The relationship between manufacturers and distributors plays a key role in long-term development and requires rationalization.
To our distributors, I want to stress that regardless of market changes, we must prioritize the domestic market. Our supply, key areas, and customers must remain stable, and we must guarantee pricing at the end. For example, companies like Hongfu Zai cannot engage in distribution due to misalignment with market structures. We must collaborate with distribution companies to develop together, choosing long-term partners and building new relationships through capital linkage to achieve mutual benefits.
Only in this way can we maximize cost savings and reduce marketing expenses, ensuring the optimal allocation of social resources.
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