Source: Baidu

“During the 12th Five-year Plan period (2011-2015), China achieved a leading position in the global phosphate fertilizer market. Market supply was growing steadily.

Meanwhile, the domestic industry was maturing thanks to the improvement of the industry concentration and the optimization of the industrial structure.” introduced Zhou Zuye, president of the China Phosphate Fertilizer Industry Association (CPFIA), at the meeting, “However, most phosphate fertilizer enterprises were bearing severe decline in their profits because preferential policies for the industry were abolished gradually with the accelerated marketization." Specifically:

1. Growths in both production capacity and output

According to data from the National Bureau of Statistics of the People’s Republic of China, as of the end of 2015, the quantity of phosphate fertilizer enterprises with annual revenue >=RMB20 million (about USD3 million) from their main business operations added up to 1,429; the total production capacity of phosphate fertilizers (converted to P2O5) reached 23.70 million t/a, up 0.85% YoY.

In particular, production capacity of monoammonium phosphate (MAP) and diammonium phosphate (DAP) was 18 million t/a and 21.10 million t/a respectively.

In regard to output, the national figure in 2015 hit 17.95 million tonnes with a YoY growth of 5.09%.

2. Steady improvement in industry concentration

During 2011-2015, Chinese phosphate fertilizer enterprises kept shifting their production capacity towards areas rich in phosphorus resources.

In 2015, the combined phosphate fertilizer output from Yunnan, Guizhou, Hubei and Sichuan provinces (top 4 provinces that are rich in phosphorus resources) accounted for 75.20% of the national total, up 10 percentage points over 2010; that from the biggest 10 domestic phosphate fertilizer enterprises occupied 59.30% of the national figure, up 13.30 percentage points over 2010.

3. Optimization of industry structure

During 2011-2015, output of high concentration phosphate fertilizers such as MAP and DAP continued growing and occupying an increasing proportion to the total. In this period, the total output of high concentration phosphate fertilizers reached 16.62 million tonnes with its proportion to the total up 1.80 percentage points over the last five years (2006-2010).

In addition, sales of new fertilizers such as slow release fertilizers and water-soluble fertilizers surpassed 10% of the total for the first time.

4. Severe decline in profits

Oversupply was worsening as the growth of demand slowed down in both domestic and foreign markets. In addition, preferential policies for the industry were abolished gradually with the accelerated marketization.

As a result, phosphate fertilizer enterprises suffered significant declines in their profits even though most of them gained growths in both output and sales. Specifically, their average profit margin fell from 5.90% in early 2011 to only 2.10% at the end of 2015.

Analyst CCM concluded the development trends of China's phosphate fertilizer industry in the near future based on opinions from industry insiders and enterprise representatives:

1. Phaseout of outmoded production capacity and optimization of product structure to be accelerated

The CPFIA expected the total production capacity of phosphate fertilizer to be controlled below 22 million t/a by 2020. After the phaseout of 3 million t/a outmoded capacity, the sales of new fertilizers will improve by 10 percentage points. In particular, the annual average utilization rate of capacity of high concentration phosphate fertilizers will surpass 80%.

Furthermore, the wet process production technique for fine phosphoric acid with low costs and high yield will be greatly promoted. By 2020, the production capacity of wet process phosphoric acid is expected to reach 2 million t/a, which is hoped to optimize and extend phosphate fertilizer enterprises’ product lines.

2. “Internet Plus” to become new trend

The combination of E-commerce and the phosphate fertilizer industry will help enterprises expand sales channels and cut marketing costs. So far, many enterprises such as Kingenta Ecological Engineering Group Co., Ltd. and Chengdu Shindoo Chemical Industry Co., Ltd. have built their own E-commerce platforms.

In addition, some enterprises like SinoChem Group and Yunnan Yuntianhua have been trying to utilize the Big Data to promote smart fertilizing which is in response to the MOA’s environmental protection requirements on scientific fertilizing.

3. Export market to fluctuate

The export market has always been playing an important role in running down phosphate fertilizer stocks. In 2015, the total export volume of phosphate fertilizers reached 5.50 million tonnes, 30.64% of the national total output.

However, China’s phosphate fertilizer export market may be severely hit in the near future as its traditional export destinations such as Pakistan and Indonesia have begun to build production facilities themselves and countries such as Saudi Arabia and Morocco that are rich in phosphorus resources have begun to put their phosphate projects into production.

“During 2013-2020, about 10 million t/a phosphate projects will be put into production in Morocco and the total output of phosphate fertilizers in Saudi Arabia is also expected to increase significantly.” predicted Xiu Xuefeng, vice president of the CPFIA.

China's output and consumption of phosphate fertilizers, 2010-2015, '000 tonnes

Source: China Phosphate Fertilizer Industry Association

This article comes from Phosphorus Industry China Monthly Report 1606, CCM

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