China: the great locomotive for the fertilizer industry

In the last years, China has been the great locomotive for the fertilizer industry. Between 2002 and 2010 the Chinese fertilizer consumption increased at an annual rate of 3%. But things always change. The government’s 12th Five-Year Plan, adopted in March 2011, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent on exports in the future. However, China has made only marginal progress toward these rebalancing goals. Chinese economic growth slowed in the first quarter 2012 to the weakest since 2009 as the government’s campaign to rein in inflation and home prices eroded domestic consumption and the European debt crisis curbed exports. Demand for grains hasn’t slowed because of increased industrial use and livestock consumption, with China National Grain & Oils Information Center estimating corn imports may more than triple this year.

Now China is forecasted to have in the 2010-2015 period an increase in fertilizer consumption at an annual rate of 1.7%. The slowdown is expected to be primary in the two most important nutrients, namely nitrogen, at an annual rate of 1.4%, and phosphorus at an annual rate of 0.5%. Potash is expected to have a strong increase, at 6.2% for the mentioned period, but they cover their needs of this nutrient importing about half of their needs. They have been traditionally the global second largest potash importer after India, accounting for about a fifth of the global trade. Chinese agricultural production growth is limited by low yields, lack of water and technology, which can be improved with policy and technological support.

China, with some 30% of the world fertilizer consumption, is the major player, and the key factor in determining the future trends of the global fertilizer market. They have done incredible advances, becoming self-reliant for urea in the 2003 and for DAP in the 2006, being, as said above, highly dependent on potash imports. China exported 3.6 million tons urea in 2011, excluding exports of small bags (<10kg) and cross border trade with Vietnam, compared with seven million tons in 2010. More severe export restrictions and higher domestic prices led to reduced exports, despite the sharply higher level of global urea prices. They have strongly emerged in the field of speciality fertilizers, such as controlled-release fertilizers and potassium nitrate. The dynamics of the fertilizer production and imports of the second world economy will have the most critical impact on the future of the global fertilizer industry.

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