The prospect of listed fertilizer companies with serious overcapacity is bleak

The annual spring ploughing curtain is slowly opened again, but the chemical fertilizer industry, which is closely related to farming, has been unable to see "spring" for a long time.

Recently, Xinyangfeng released its annual report, which said that the company's main business, phosphate and compound fertilizer, whose sales accounted for about 96.97% of total revenue in 2014, accounted for more than 20% of total assets for two consecutive years in 2013 and 2014. In 2014, the inventory of phosphate and compound fertilizer increased by 34.02% over the same period last year. Xinhua Food has combed the annual reports of listed companies and found that among the peers of New Yangfeng, the inventory growth of Stanley and Yuntianhua is even more amazing.

Behind the high inventory of the "boss", the life of the whole industry is not easy. It is not only high inventory, but also overcapacity, declining market demand, low industry profits, intensified market competition and blind expansion and other factors that restrict the development of the industry.

The problem of excess beats the big "fat" guy.

During the spring ploughing season, when fertilizer sales are booming, long Qiang, a fertilizer dealer in Chengdu, Sichuan, describes the opposite to Xinhua Foods. "now it is basically at a loss to sell 'big fertilizers'," says long Qiang. "none of us dealers take the initiative to push these 'big fertilizers' because if we sell one bag, we will lose a bag of money."

The "big fertilizer" in long Qiang's mouth refers to the most important nitrogen, phosphate and potash fertilizers in the chemical fertilizer industry. According to the latest market survey of the all-China Federation of supply and Marketing Cooperation, the total supply of chemical fertilizers during spring ploughing in 2015 will reach 38.44 million tons, which can not only fully meet the needs of spring ploughing, but also show varying degrees of surplus of nitrogen fertilizer, phosphate fertilizer and potash fertilizer. Among them, nitrogen fertilizer supply exceeds demand by 250000 tons, phosphate fertilizer supply exceeds demand by 880000 tons, and potash supply exceeds demand by 2.65 million tons.

In addition, according to the data provided by Chen Hongkun, vice president of Shandong Kim Jong Da Ecological Engineering Co., Ltd., to Xinhua Food, 18 synthetic ammonia and urea projects were put into production in 2013, with a total capacity of 74.08 million tons of synthetic ammonia and 79.48 million tons of urea, respectively. The country's nitrogen fertilizer overcapacity exceeded 30%. In 2014, China's urea output was the same as the previous year, with a total of about 80.7 million tons. At present, the total production capacity of phosphate fertilizer in China is about 23.6 million tons, and the consumption is only 12 million tons; the total production capacity of compound fertilizer is about 200 million tons, but the annual apparent consumption is less than 60 million tons, and the operating rate is less than 30%.

"especially in 2013 and 2014," Chen Hongkun, vice president of Kim Jong Da Group, told Xinhua Foods. "these two years are the most difficult years for the chemical fertilizer industry since the beginning of the new century."

Li Dianping, director of the Agricultural Resources Bureau of the all-China Federation of supply and Marketing Cooperation, said that as the demand for chemical fertilizer in China's agricultural production remains stable, it is difficult to digest excess fertilizer capacity, resulting in a gradual decline in fertilizer prices. Data show that since 2013, China's chemical fertilizer prices have experienced three consecutive years of decline. New Yangfeng 2014 annual report predicted that "the fertilizer industry as a whole to alleviate the problem of overcapacity, backward capacity elimination and merger and restructuring will become increasingly fierce, profit margins will become more and more thin."

It is not empty talk that the profit margins of the fertiliser industry are getting thinner. Guizhou Chitianhua released the company's annual report on April 11, 2014, the company's revenue was about 3.287 billion yuan, and the net profit was about-575 million yuan. Among the leading enterprises in the chemical fertilizer industry, Chitianhua is not the only one with net profit loss. Sichuan Meifeng's 2014 revenue is about 4.769 billion yuan, with a net profit of about-245 million yuan; Yuntianhua's 2014 revenue is about 54.492 billion yuan, with a net profit of about-2.583 billion yuan. In addition, there are some fertilizer bosses who have halved their profits. For example, Hubei Yihua's 2014 performance forecast said that the company's profit in 2014 was 47% lower than the same period last year.

Under the situation of overcapacity, the sale of chemical fertilizer is difficult, and the inventory is the most direct manifestation. According to New Yangfeng's 2014 annual report, inventories accounted for more than 20 per cent of total assets for two consecutive years in 2013 and 2014. In addition, Xinyangfeng's phosphorus and compound fertilizer inventory increased sharply in 2014, an increase of 34.02% over the same period last year. In the 2014 annual reports of chemical fertilizer bosses Stanley and Yuntianhua, inventory growth reached 52.71% and 103.67% respectively. The sharp increase in inventory further reflects the huge sales pressure on the industry as a whole. According to industry insiders, there are roughly three reasons for the inventory of chemical fertilizer enterprises: first, to prepare stock, in order to make up for the lack of production capacity in the peak season and excessive market demand in the short term, the country's light storage policy is also for the same purpose to ensure the full supply of products in the peak season; second, due to fierce market competition and unsalable products, resulting in a certain inventory; third, affected by the policy, some backward enterprises do not adapt to the situation.