Fertilizer market reform accelerates

As the marketization process accelerates, the fertilizer preferential policies will also change. In recent years, the fertilizer industry has developed rapidly. "Overcapacity" has gradually replaced "supply" and has become the main theme of the fertilizer market. Faced with the new situation, we will reposition the product attributes of chemical fertilizers and gradually accelerate the market-oriented reform of the fertilizer industry by reducing the preferential space compared with other products.

Marketization, Promotion of Fertilizer Preferential Policy Reform

The pace of marketization begins with fertilizer prices. In July 2005, the National Development and Reform Commission promulgated the "Program for Reforming and Perfecting the Regulatory Mechanism of Chemical Fertilizer Prices (Draft)" to make it clear that it is necessary to adhere to the orientation of market-oriented reform and fully release fertilizer prices. At the end of 2008, the executive meeting of the State Council researched and determined the “six changes of chemical fertilizer reform countries” and established a market-oriented fertilizer price formation mechanism as the direction of reform.

While the price of chemical fertilizers is being marketed, the country still retains many preferential policies to ensure the stability of the development of the fertilizer industry. The fertilizer industry enjoys more preferential policies, such as preferential electricity prices, preferential natural gas prices, limited coal price limits, fertilizer transportation price concessions, and direct subsidies for fertilizer products, which reduce the production and sales costs of fertilizer companies to varying degrees. Since 2009, the state has promoted the rapid development of the fertilizer production and distribution industry through a series of measures including import and export control, off-season reserves, comprehensive subsidies for agricultural resources, and raising the minimum purchase price of grain.

However, with the gradual improvement of China's economic level, natural gas, electricity, transportation and other fertilizers can enjoy preferential industries, and are also accelerating the process of marketization. In particular, the convening of the Third Plenary Session of the 18th CPC Central Committee has determined the direction of market-oriented reforms, and various industries and trades have fully regulated and controlled the market. At the same time, the chemical fertilizer industry has developed rapidly in recent years, and “overcapacity” has gradually replaced “supply beyond supply” and has become the main theme of the fertilizer market. Faced with the new situation, we will reposition the product attributes of chemical fertilizers and gradually accelerate the market-oriented reform of the fertilizer industry by reducing the preferential space compared with other products.

Fertilizer companies take a positive view of the increase in costs

As the prices of electricity, natural gas, and freight have been constantly raised in recent years, and the trend of preferential cancellation has been obvious, most chemical fertilizer companies have had a dull response to this type of cost increase, and more objectively understand the impact of market-oriented reforms on the fertilizer market.

Some companies have seen the rationalization of marketization when analyzing this phenomenon. According to Li Yufeng, Minister of Strategic Development of Jiangsu Chemical Industry Co., Ltd., “For the past ten years, fertilizer preferential policies have indeed made many fertilizer companies stronger. However, with the rapid development of the fertilizer industry and the current overcapacity, there is no need for the country to Production provides abundant preferential conditions, and the marketization trend of the fertilizer industry is certain.From the perspective of output value, the fertilizer industry is only a very small branch in the industry, and too many preferential policies make fertilizers become a deformed chain on the market. For example, 20% of urea production is used in industry, and downstream industrial products do not receive input tax when purchasing urea, and only output tax, which brings unfair policy. Only considering fertilizer products from the perspective of agriculture will cut off the industrial products. With the growing strength of the market's hands, the government’s ability to adjust physical means will naturally become smaller and smaller.”

Cancellation of preferential policies has already played a significant role in marketization. It is understood that many companies have complained about "unfair treatment" under the preferential policy for rail transport. It is because of the preferential policies for fertilizer transportation that the railway departments in some regions have chosen to ship other goods as a priority, resulting in the untimely shipment of fertilizer products and a backlog of inventory. A representative of a potash fertilizer company in Qinghai has reported that since the number of wagons entering Qinghai has been relatively small in previous years, Qinghai potash companies often “grab” less than wagons, thus limiting the sales of domestic potash in the market, and the reorganized railway company. The increase in freight rates has increased the enthusiasm of the railway sector for shipping to Qinghai and also facilitated the outward shipment of goods from Qinghai. Zhu Bin, deputy general manager of Qinghai Lianyu Potash Fertilizer Co., Ltd., said that as the number of wagons entering Tibet has increased, Qinghai has also increased the supply of Qinghai wagons. However, for the impact of the cancellation of preferential policies, Zhu Bin admits that the production and transportation costs of enterprises have actually increased, and it is bound to be reflected in the increase in the sales price of products. But now the market decides everything. If the prices of chemical fertilizers are high and transactions are positive, companies are not Excessive consideration will be given to the cost pressure brought about by the cancellation of preferential policies.