Fertilizer industry: moving forward in policy control

Since last year, domestic coal prices have continued to rise. In particular, the snowstorm in the first quarter of this year has caused coal prices to increase at an accelerated rate. Since the beginning of the year, the increase has been 50%. The production cost of coal urea enterprises has risen sharply and the industry operating rate has dropped. Domestic urea production capacity is excess, and exports are an important means to ease market pressure. Since April 20th, special export tariffs have been imposed to seal export channels, and international market prices have soared. Domestic urea prices have struggled to rise under cost pressures.
The U.S. government closed its 5 million tons of ammonium phosphate production capacity due to its strategic protection of phosphorus resources. The United States changed from an ammonium phosphate exporting country to an importing country, and China's phosphate fertilizer output expanded rapidly, and it has become a net exporter from a net importer. Similar to urea, the prices of main raw materials for phosphate fertilizers have also continued to rise. The phosphate fertilizer industry is also facing significant cost pressures. At present, the sulfur content of the domestic market is as high as 5,600 yuan/ton, and the price of phosphate rock is also 400 yuan/ton. There is still upward momentum in the later period. After the increase of export tariffs, exports basically stopped; the country continued to strengthen the export control of raw materials such as phosphate ore, exempted import tariffs, imposed export tariffs; exempted DAP value-added tax and imported sulphur value-added tax, in order to reduce industry production costs, support Industry development.
The world's potash resources are extremely abundant, but the distribution of resources is extremely uneven. The combined reserves and basic reserves of Canada, Russia, Belarus, and Germany respectively account for 92% and 81% of the world total. These countries have dominated the world potash fertilizer market. The global potash fertilizer production capacity is actually surplus, but the remaining production capacity is highly concentrated. Potash Corp of Canada owns 72% of the world's remaining production capacity and has strong regulatory power. International oligopolists will continue to maintain a relatively low operating rate in order to maintain a relatively tight supply of global potash fertilizer. International potash fertilizer prices continue to rise, after July may reach 1,000 US dollars / ton, the domestic potash fertilizer prices due to uncertain policies, the current domestic manufacturers of potassium chloride to stop the basic quotation, partial quotation of potassium sulfate fertilizer company has reached 6,000 yuan / ton, Salt Lake Potash (91.00, 0.10, 0.11%, it), Qinghai Bohai, and Xinjiang Luokao stopped their offers. The current debate on potash fertilizer pricing policy focuses on whether it is subsidizing importers or directly subsidizing farmers. Subsidizing farmers should be a better choice, and the benefits can be attributed to three points: First, fewer links, simple operation, and easy supervision; second, low cost, can increase the efficiency of the use of special funds; Third, farmers can see the benefits of real money, Mobilize crop enthusiasm. And it can avoid the two-handed policy of some agricultural capital enterprises to “request government subsidies in one hand and sell fertilizers in private hands at a high price”.
Nitrogen fertilizer company we recommend to have independent coal-water slurry gasification technology and achieve product diversification, outstanding cost advantages, the next two years continue to have new projects put into production "Hulu Hengsheng (24.62,0.58,2.41%, bar)". Phosphate Fertilizer Company recommended that the Group have the most abundant phosphorous resources in the country and suspend the licensing of "Yuntianhua (62.00, 0.00, 0.00%, bar)" for major asset restructuring. If the country does not adopt the subsidy for potash fertilizer importers and instead adopts the plan of directly subsidizing farmers, letting go of the market price of potash fertilizer, it is recommended to buy “Salt Lake Potash Fertilizer” with the advantage of potash resources (3004.393, -91.68, -2.96%, or bar).

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