In response to the rising fertilizer prices, experts have recommended maintaining export controls, suspending export tax rebates, continuing to impose temporary tariffs, and increasing domestic resources to ensure effective market management. Currently, it's the off-season for fertilizers in most parts of China, but many distributors are buying ahead due to expectations that spring fertilizer prices will continue to rise, contributing to the recent surge in chemical fertilizer prices. Industry analysts suggest that four key factors could drive further price increases in next year’s spring season.
Firstly, international fertilizer prices are on the rise due to declining global inventories and strong demand from the bio-energy sector. Countries like Brazil and the U.S. have increased agricultural investments, while India has encouraged greater fertilizer use through government subsidies. These dynamics have triggered a surge in the global fertilizer market. Additionally, raw material costs such as crude oil and natural gas remain high, keeping production costs elevated. Rising ocean freight charges also add pressure on international fertilizer prices, which in turn influences domestic markets in China, a major consumer of chemical fertilizers.
Secondly, production costs for fertilizers are increasing. Energy and raw material prices, including coal, electricity, and gas, have risen significantly. For example, the ex-factory price of monoammonium phosphate—essential for fertilizer production—rose from 1,800 yuan to 3,100 yuan within a year, while sulfur prices increased by over 100%. Transportation costs have also gone up, with railway freight rates increasing by 5.1% and fuel prices rising in late 2007. These cost pressures are directly impacting fertilizer producers.
Thirdly, China faces resource shortages in phosphorus and potassium. Potassium resources are particularly scarce, with domestic production meeting only one-third of demand, forcing heavy reliance on imports. This lack of control over potash supply limits China’s ability to set competitive prices. Similarly, phosphate fertilizer production meets about 70% of domestic needs, with the rest coming from imports. China is a major player in the global diammonium phosphate trade, importing a significant portion of its requirements.
Lastly, export demand is playing a key role. The price disparity between domestic and international markets has made exports highly attractive. For instance, Chinese nitrogen fertilizers are competitive in the Indian market due to higher prices in the Middle East and Russia. As a result, India has become a major export destination for Chinese nitrogen fertilizers, exacerbating domestic shortages and pushing prices higher.
Experts warn that the sharp increase in fertilizer prices is detrimental to farmers’ income and production incentives, potentially threatening national food security. To address this, relevant authorities should develop more effective measures tailored to the domestic market structure. Recommendations include restricting the export of key fertilizers like urea and diammonium phosphate, suspending export tax rebates, and maintaining seasonal tariffs on urea exports. Increasing domestic supplies and ensuring the quality and reliability of commercial reserves are also crucial steps to stabilize the market and protect farmers.
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