The nitrogen fertilizer industry is accelerating its consolidation, and new types of nitrogen fertilizers are thriving accordingly.

　　The rise in raw material prices in the nitrogen fertilizer industry has become an undeniable reality. From large-scale inputs like natural gas, coal, and electricity to smaller ones such as labor and environmental protection costs, all costs are rising in tandem amid a backdrop of tight credit conditions and rampant inflation. Faced with soaring costs and intense market competition, the nitrogen fertilizer industry is bound to accelerate its consolidation in 2012. The market will become increasingly standardized, policies will grow more stable, and the industry’s structural landscape will become ever clearer.

 

　　In 2011, amid rising costs and an unfavorable international financial environment, China’s nitrogen fertilizer market department was no longer as overly sensitive as it had been in previous years. Despite restrictions on exports and severe overcapacity, and despite distributors still being wary of the dramatic price swings of earlier years and largely adopting a wait-and-see approach, the domestic market demonstrated a mature pattern of price stability and market stability. This allowed market participants to gradually ease their concerns, marking a promising start for China’s nitrogen fertilizer industry during the 12th Five-Year Plan period.

 

　　As is well known, nitrogen fertilizers have long been the dominant force in the fertilizer industry—whether in terms of output, usage, or influence. As a “barometer” of market changes in the national fertilizer industry, every move made by the nitrogen fertilizer sector inevitably affects the overall direction of the entire fertilizer industry. However, due to the irrational industrial layout in recent years, market turmoil caused by overcapacity has not only left distributors at a loss for direction but has also severely impacted manufacturers themselves, driving many to operate at a loss and even resorting to inverted pricing—a situation that has become a persistent complaint among most producers. Consequently, the position of nitrogen fertilizers as the “leader” of the fertilizer industry has gradually become more symbolic than substantive.

 

　　Faced with the challenging realities of the industry, accelerating structural and industrial adjustments has become the key to the future development of the nitrogen fertilizer sector. In recent years, traditional nitrogen fertilizer products—characterized by overcapacity, low profits, and low utilization rates—have given way to a new wave of vitality as innovative nitrogen fertilizers have emerged one after another. These new products—including efficiency-enhancing nitrogen fertilizers, novel nitrogen fertilizers, controlled-release urea, and peptide urea—are rapidly entering the market. The introduction of these new products not only enriches the market but also provides manufacturing enterprises with fresh opportunities to transform their product portfolios and strengthen their core competitiveness. Meanwhile, once launched, these differentiated new products have quickly won favor among distributors, helping them break away from the severe homogenization in sales and bringing them substantial economic benefits. As end consumers, farmers are brimming with anticipation for these new nitrogen fertilizers. Most farmers hope to see a shift away from the current situation in which urea dominates the nitrogen fertilizer market; they are eager for more diverse options. Moreover, these new products offer longer-lasting fertilizer effects than urea, higher utilization rates, and certain drought-resistant and pest-resistant properties—making them an obvious choice for farmers. In 2011, China’s nitrogen fertilizer industry continued to see the emergence of a number of enterprises with distinct advantages and innovative products. While enriching the market and enhancing competitiveness, this trend seems to indicate that the Chinese market for new nitrogen fertilizers will usher in new development opportunities in 2012. However, while we rejoice at the vigorous growth of these new nitrogen fertilizers, we must also recognize that, from establishing a comprehensive standards system to perfecting market regulation, there is still a process ahead before these new products can fully realize their potential.

 

　　In 2012, in addition to the significant development expected for new types of nitrogen fertilizers, national policies and large-scale mergers and reorganizations within the industry will also contribute to the stable growth of China’s nitrogen fertilizer sector. From the perspective of tariff policies, the urea tariff regime in 2012 remained largely unchanged from 2011; however, it explicitly stipulated that the benchmark price did not include taxes, effectively lowering the export threshold—a move that represents a long-term positive factor for the urea industry in 2012. Meanwhile, with the rise of several major nitrogen fertilizer groups such as Hubei Yihua, Jincheng Coal, Yangmei, and CNOOC, the industry’s consolidation process is quietly underway. As industrial concentration continues to increase, these large enterprises are increasingly demonstrating advantages in cost, market position, scale, capital, and raw materials. Precisely because of this growing concentration in the nitrogen fertilizer industry, the domestic nitrogen fertilizer market is becoming increasingly standardized, policy and pricing are becoming more stable, and the overall industry structure is becoming clearer.

 

　　Li Shousheng, Chairman of the China Nitrogen Fertilizer Industry Association, said when discussing the outlook for China's nitrogen fertilizer industry in 2012 that the industry's key priorities for 2012 would be to vigorously promote technological advancements, accelerate structural adjustments, focus on energy conservation and emission reduction, and innovate agrochemical services. The nitrogen fertilizer industry must firmly adhere to chemical fertilizers while also moving beyond them, forging a new path that integrates both fertilizer production and chemical services.

 

Excerpted from "Northern Agricultural Inputs"