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After the Spring Festival, the spring plowing season is gradually beginning across the country, from south to north. Before the holiday, fertilizer prices were a hot topic among farmers and industry insiders. However, recent reports have revealed two very different price trends in two provinces, creating confusion in the market.
In Guizhou Province, a report from the China Nitrogen Fertilizer Industry Association on January 23 indicated that urea prices have dropped to around RMB 1,480 per ton (ex-works), below the national benchmark. This has led to losses for most nitrogen fertilizer companies in the province. The Guizhou Nitrogen Fertilizer Industry Association has even submitted a request to the national association, asking it to urge the National Development and Reform Commission to reconsider the export tariff policy, hoping to allow some urea exports to ease the financial pressure on local producers.
Contrastingly, in Gansu Province, urea, ammonium bicarbonate, and diammonium prices have all risen sharply due to supply shortages, with increases ranging from 11% to 38%. This divergence in price trends has made this year’s fertilizer market highly unpredictable.
So, which one reflects the true market situation? In Guizhou, the mountainous terrain and relatively low demand for chemical fertilizers contribute to a surplus in the market. Although there are large and medium-sized fertilizer plants like Chitianhua and Guizhou Fertilizer Plant, the overall production scale remains limited. This imbalance between supply and demand has been worsened by continued export tariffs, which prevent companies from stabilizing their prices through international sales.
Additionally, rising coal costs have further strained the industry. Coal prices in Guizhou have surged from 250 yuan/ton in 2003 to 620 yuan/ton in January 2006. With production costs climbing and market demand limited, many fertilizer companies are struggling, and price hikes are unlikely.
In Gansu, however, the situation is different. Favorable agricultural policies, such as the abolition of agricultural taxes, have encouraged farmers to grow more grain. Moreover, early snowstorms in northern areas have increased planting enthusiasm. As spring plowing begins in full force, demand for fertilizers has surged, pushing prices upward. Rising raw material and energy costs, along with the upcoming fuel tax, also add pressure to production costs.
This contrast highlights the complexity of China’s fertilizer market. Regional differences in supply, demand, and policy implementation mean that a one-size-fits-all approach cannot work. Only by allowing the market to function more freely can these regional issues be effectively addressed.
This year’s fertilizer price fluctuations may signal an opportunity for deeper reform. For fertilizer companies, the challenge is clear: adapt or fall behind. Are they ready for the changes ahead?