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After the Spring Festival, spring plowing is gradually starting across the country, from south to north. Before the holiday, fertilizer prices were a hot topic. However, recently, reporters have uncovered two contrasting price trends in different provinces, raising questions about the true state of the market.
In Guizhou, the price of urea has dropped to around RMB 1,480 per ton (ex-works), according to the China Nitrogen Fertilizer Industry Association’s Large and Middle Nitrogen Branch on January 23. This is below the quasi-price benchmark, and many local nitrogen fertilizer companies are now operating at a loss. The Guizhou Nitrogen Fertilizer Industry Association has even submitted a report to the national association, urging the National Development and Reform Commission to reconsider the export tariff policy for urea, hoping to allow limited exports to ease financial pressures on local producers.
In contrast, Gansu Province has seen a significant rise in fertilizer prices, with urea, ammonium bicarbonate, and diammonium increasing by 11% to 38% due to supply shortages. This stark difference between regions has created confusion in this year’s fertilizer market.
So, which one reflects the real situation? In Guizhou, the market is small and mountainous, with limited demand for chemical fertilizers. Although there are some large plants like Chitianhua and medium-sized ones like Guizhou Fertilizer Plant, the overall supply exceeds demand, leading to a surplus. Export restrictions have worsened the situation, as the government continues to impose temporary export tariffs. Additionally, rising coal costs—such as from 250 yuan/ton in 2003 to 620 yuan/ton in early 2006—have increased production costs, squeezing profit margins further.
In Gansu, however, the situation is different. The cancellation of agricultural taxes and the absence of price controls on agricultural resources have encouraged farmers to grow more grain. Favorable weather conditions, including snowstorms in northern areas, have also boosted planting enthusiasm. With the start of spring plowing, demand for fertilizers has surged, driving up prices. Moreover, rising fuel costs and the upcoming fuel tax reform—expected to add 30–50% to retail oil prices—are adding pressure on fertilizer producers.
These two examples show that the Chinese fertilizer market is highly regional and complex. Factors such as raw material availability, transportation costs, and local policies all influence prices differently. It’s clear that a one-size-fits-all approach won’t work. Only by letting the market regulate itself can these issues be effectively addressed.
This year’s fertilizer price fluctuations may signal an opportunity for deeper market reforms. As the industry faces new challenges, will fertilizer companies be ready to adapt?