Chemical Fertilizer Industry: standing at the turning Point of "Life" and "death"

The growth rate of agricultural fertilizer demand in the nitrogen fertilizer industry has slowed down, the contradiction of overcapacity is still prominent, and the product structure and marketing services have been unable to adapt to and meet the new changes in agricultural demand. Challenges and opportunities coexist, and nitrogen fertilizer enterprises stand at the inflection point of "life" and "death".

From January to July this year, the net loss of the nitrogen fertilizer industry reached 700 million yuan, while the compound fertilizer industry made a profit of 12.5 billion yuan, an increase of 46.7 percent over the same period last year. Under such a strong contrast, the growth rate of agricultural and chemical fertilizer demand in the nitrogen fertilizer industry has slowed down, the contradiction of overcapacity is still prominent, and product structure and marketing services have been unable to adapt to and meet the new changes in agricultural demand. Challenges and opportunities coexist, nitrogen fertilizer enterprises stand at the inflection point of "life" and "death", they not only need to think about change, but also need to change quickly.

Recently, sponsored by China Nitrogenous Fertilizer Industry Association, Henan Petroleum and Chemical Industry Association, Henan Xinlianxin Chemical Fertilizer Co., Ltd., and Haohua Junhua Group Co., Ltd., the 2015 National Nitrogenous Fertilizer Industry Marketing Conference supported by Jiangsu Andfu Chemical Trading Co., Ltd. was held in Zhengzhou, Henan Province. More than 300 representatives of nitrogenous fertilizer production and circulation enterprises from all over the country attended the meeting. In-depth discussion of the urgent issues such as marketing innovation and product structure upgrading in the nitrogen fertilizer industry.

Operation and predicament Nitrogenous Fertilizer Enterprises meet the Cold Wind

Last year, the Ministry of Agriculture put forward the "zero growth target of chemical fertilizer use by 2020", and the growth rate of chemical fertilizer demand will gradually slow down in the future. According to the forecast of the Ministry of Agriculture, the demand for agricultural chemical fertilizer in China is expected to grow by about 1% during the 13th five-year Plan period. As a chemical fertilizer enterprise, on the one hand, it has to face the current situation of overcapacity of nitrogen fertilizer, on the other hand, it has to face the slowing demand for chemical fertilizer. Under the double pressure, the enterprise is beset with difficulties.

Gao Li, deputy secretary general of the China Nitrogenous Fertilizer Industry Association, said that from January to July this year, the national synthetic ammonia output was 35.477 million tons, an increase of 0.7 percent over the same period last year; the national nitrogen fertilizer output was 26.68 million tons of pure nitrogen, an increase of 0.7 percent over the same period last year; and the national urea output was 17.766 million tons of pure nitrogen, an increase of 0.7 percent over the same period last year. Under policy control, with the upgrading of safety and environmental protection standards, the pace of new production capacity slowed down in 2014, and the withdrawal of production capacity accelerated significantly. 5 million tons of capacity were withdrawn for the whole year, and urea capacity is expected to be shut down of about 3 million tons in 2015.

To make matters worse for domestic nitrogenous fertilizer enterprises, the preferential policies of chemical fertilizer are gradually being cancelled. Gu Zongqin, chairman of the China Nitrogenous Fertilizer Industry Association, said that since February this year, the preferential policy of chemical fertilizer railway freight has been cancelled, and since April, the electricity price of small and medium-sized chemical fertilizers has been raised by an average of 0.10 yuan per kilowatt-hour. According to the current average price difference of 0.12 yuan per kilowatt-hour between chemical fertilizer electricity prices and large-scale industrial electricity prices, the cost of urea will rise by about 115 yuan per ton. In addition, starting from September 1 this year, value-added tax on chemical fertilizers will resume, and the cost per ton of urea will rise. The substantial increase in the operating cost of nitrogen fertilizer production will make the production and operation of a considerable number of enterprises in a dilemma.

In terms of export trade volume, under the repeated coordination of the China Nitrogenous Fertilizer Industry Association, exports of nitrogen fertilizer from January to July were 5.539 million tons, an increase of 54.9 percent over the same period last year, and exports of urea were 7.748 million tons, an increase of 46.7 percent over the same period last year. From the export price, the average price of urea reached 295 US dollars per ton, narrowing the gap. In spite of this, Gu Zongqin said that the new foreign production capacity has been put into production one after another, with 6.78 million tons of synthetic ammonia and 7.3 million tons of urea in 2015. "with the exploitation of shale gas, the United States will become the country with the fastest growth in nitrogen fertilizer production capacity, and the United States will greatly reduce its nitrogen fertilizer imports in recent years, and there will be certain exports; coupled with the weak recovery of the world economy, leading to the rise of trade protectionism and intensified frictions. If Indonesia initiates an anti-dumping lawsuit against China's ammonium nitrate exports, China's nitrogen fertilizer exports will face greater challenges."

Operation and difficulties are in front of us, domestic nitrogenous fertilizer enterprises are walking in the cold wind, it is urgent to seize the positive and positive opportunities for transformation.

Opportunities far outweigh challenges under change.

In the face of the complex and severe market situation, the development of the industry also has new opportunities and new space. To this end, Gu Zongqin summed up five points: first, the market-oriented reform of chemical fertilizer and the pressure of safety and environmental protection promote the survival of the fittest in the nitrogenous fertilizer industry and speed up the withdrawal of backward production capacity, which is conducive to resolving the contradiction of overcapacity. For example, after the electricity price discount is cancelled, some old devices with high power consumption will be eliminated; after the gas price discount is cancelled, the production capacity of some air head devices far away from the gas source and with high gas prices will be withdrawn one after another.

Secondly, the market demand has increased steadily. Although the growth rate of agricultural demand slows down, industrial demand still maintains a rapid growth rate. It is estimated that the domestic demand for industrial urea will reach 16.6 million tons by 2016, so it is suggested that nitrogenous fertilizer enterprises should strictly control the total capacity and vigorously develop industrial applications. On this basis, it is estimated that the demand for industrial synthetic ammonia and industrial urea will increase by 500000 tons and 600000 tons respectively.

Third, the acceleration of the "Belt and Road Initiative" strategy is conducive to opening up the international market. According to the Ministry of Commerce, in the first five months of this year, Chinese enterprises made direct investment in 48 countries and regions along the "Belt and Road Initiative" route, and the Ministry of Commerce is organizing the docking of chemical fertilizer trade with "Belt and Road Initiative" countries. It will promote China's chemical fertilizer enterprises to open up the international market.

Fourth, the government should streamline administration and delegate power to stimulate the vitality of enterprises. According to the unified arrangement of the State Council, the Ministry of Agriculture and the General Administration of quality Supervision, Inspection and Quarantine reform the registration of fertilizers and the administrative examination and approval of industrial licenses, which can reduce the administrative costs of compound fertilizers and new fertilizers, improve the efficiency of enterprises in applying for certificates, and further reduce the costs of enterprises.

Finally, the national policy of supporting agriculture and the scale and modernization of agriculture have brought new opportunities for the chemical fertilizer industry. This year, the Ministry of Finance and the Ministry of Agriculture jointly issued the "guidance on adjusting the three Agricultural subsidy policies" and decided to adjust 20% of the comprehensive agricultural subsidies issued by the central financial arrangements to support the appropriate scale operation of grain. At the same time, with the popularization of advanced fertilization methods such as soil testing formula fertilization, mechanized fertilization and irrigation fertilization, it will bring good opportunities for new basic fertilizers, large granular fertilizers, water-soluble fertilizers and liquid fertilizers with high performance-to-price ratio.

Wang Shengmin, deputy director of the Price Department of the National Development and Reform Commission, bluntly said that the government adjusts relevant policies only as a "night watchman" and that fertilizer companies need to learn to cope and adjust themselves according to market changes. "in a changing environment, opportunities far outweigh challenges!"

The rise of value-added nitrogen fertilizer leads the direction of change

The opportunity is good, but if nitrogen fertilizer enterprises want to survive in the cold wind, they must strengthen their "self-cultivation". At present, most of the nitrogen fertilizer enterprises are traditional basic fertilizers, and the development of efficient special fertilizers that meet the requirements of modern agricultural development lags behind, and the product structure lags behind.

Zhao Bingqiang, secretary-general of the Chinese Society of Plant Nutrition and Fertilizer, believes that quality instead of quantity is the way for the future development of China's fertilizer industry. "the focus of future fertilizer research should be on how to improve efficiency and utilization rate. The greening and high efficiency of chemical fertilizer products is the way to reduce the application of chemical fertilizer and increase efficiency. " To this end, Zhao Bingqiang proposed to develop value-added fertilizers, water-soluble fertilizers and soil conditioners.

Value-added nitrogen fertilizer is a new type of high-efficiency fertilizer which is added to the original traditional nitrogen fertilizer products of nitrogen fertilizer enterprises, including medium and trace elements, humic acid, fertilizer auxiliaries and so on. Gao Xiangzhao, chief expert of the National Agricultural Technology extension Service Center of the Ministry of Agriculture, said that on the basis of the change in the structure of chemical fertilizer application, we were pleasantly surprised to find that new and value-added products in the nitrogen fertilizer industry have developed rapidly, which has become an example of "changing the mode and adjusting the structure" of agriculture this year. Xu Xiucheng, a professor at Zhengzhou University, also believes that the direction of China's scientific and technological development is "innovation, innovation, and re-innovation," and the most fundamental way to implement the innovation-driven development strategy is to "enhance the ability of independent innovation."

The association proposes to develop 10 million tons of value-added urea, 10 million tons of urea ammonium nitrate solution and 15 million tons of nitro compound fertilizer by 2020.

Resting on one's feet will be "dead" and marketing innovation will be "healthy".

On this topic, it is a bright spot to change the existing traditional marketing mode of nitrogen fertilizer enterprises. Gao Xiangzhao pointed out that at present, China is in a critical period of rapid transformation from traditional agriculture to modern agriculture, and great efforts should be made to develop new and efficient fertilizers, among which the key to improving fertilizer utilization efficiency lies in five aspects. it includes soil testing and formula fertilization, integration of water and fertilizer, new fertilizer products, deep application of chemical fertilizer machinery and new agricultural management main body.

Gu Zongqin put forward the suggestion of striving to create a new situation in the marketing work of the nitrogen fertilizer industry. He said: do everything possible to open up domestic and foreign markets, firmly grasp the lack of effective demand, which is the main contradiction affecting the economic operation of the current industry, and tap the new demand for traditional products. Tap existing markets and seize opportunities in emerging markets. Lu Shulin, general manager of Henan Xinlianxin sales Company, said that in addition to developing efficient new products, they also step up brand promotion in marketing, observe demonstration fields, and propose solutions for different regions, crops and soil. Jie Liujun, deputy general manager of Henan Junhua Chemical Fertilizer Co., Ltd., put forward the strategy of laying out the whole country, "winning" the Northeast, "competing" the Central Plains, and "seizing" the national market.

Organize production rationally and strengthen industry self-discipline. Production capacity with backward technology and weak competitiveness will be resolutely eliminated. For example, Shandong Hualu Hengsheng has good economic benefits in recent years, mainly taking the lead in shutting down old equipment and getting rid of the burden of operating costs.

We will actively promote the action of "Internet + agricultural materials", build logistics information sharing and intelligent warehousing, improve the automation and intelligent level of logistics warehousing, and reduce the cost of operation and sales. When introducing the operation experience of Luxi Group's e-commerce platform, Li Baoquan, general manager of Nitrogenous Fertilizer sales Company of Luxi Group Co., Ltd., thought that it was the real realization of e-commerce and the promotion of Luxi marketing reform. At the meeting, representatives from Yun Tianhua and Dr. Nong introduced their experience in e-commerce operation to brainwash the delegates.

The association said that strengthening agrochemical services is an immutable topic, including accelerating the transformation of business concepts, promoting the construction of a specialized agrochemical service system, and innovating agrochemical service models. In addition, safety and environmental protection work needs to be further strengthened.

Standing at the inflection point of "life" and "death", enterprises that achieve marketing innovation ahead of time have a higher chance of survival in the future spring tide. Gu Zongqin said that even though the nitrogen fertilizer industry lost 700 million yuan in total profits from January to July this year, it reduced losses by 2.8 billion yuan compared with the same period last year. "this shows that nitrogen fertilizer enterprises can no longer rest on their laurels. Some enterprises have made great efforts to save energy and reduce consumption, upgrade products, and improve the marketing level, so that the economic efficiency of the industry has been improved."