Experts have suggested continuing to regulate exports, suspending export tax rebates, maintaining temporary tariffs, and increasing domestic resources to ensure effective control measures. Currently, it's the off-season for fertilizers in most parts of China. However, many fertilizer distributors are buying in advance, anticipating a further price increase for spring fertilizers next year, which has led to a recent spike in major chemical fertilizer prices. Industry analysts believe that four key factors will likely drive fertilizer prices higher in the coming spring.
One major driver is the rising trend in international markets. Global agricultural prices have been climbing due to declining inventories and strong demand from the bio-energy sector. Countries like Brazil and the U.S. have increased agricultural investments, fueled by the bio-energy industry. Meanwhile, India, supported by generous government subsidies, encourages farmers to use more fertilizers. These dynamics have caused a surge in global fertilizer prices. Additionally, the prices of raw materials such as crude oil and natural gas remain high, keeping production costs elevated. Rising ocean freight rates also add pressure to the already high international fertilizer prices. As a major consumer of chemical fertilizers, China is inevitably affected by these global trends.
Domestically, rising production costs are another factor. Energy and raw material prices—such as coal, electricity, and gas—have put significant pressure on the market. For example, the ex-factory price of monoammonium phosphate, a key fertilizer raw material, rose from 1,800 yuan at the start of the year to 3,100 yuan by now, while sulfur prices have surged over 100%. Transportation costs have also increased. From April 2006, railway freight rates went up by an average of 0.0044 yuan per ton-kilometer, and by November 2007, fuel prices rose by 500 yuan per ton. All of these contribute to higher overall costs for fertilizer producers.
Another challenge is the limited availability of key resources. China lacks sufficient phosphorus and potassium, with domestic potassium production meeting only one-third of the demand, relying heavily on imports. This lack of self-sufficiency means that domestic potash prices are largely dictated by imported prices, reducing China’s pricing power. Similarly, phosphate fertilizer production meets about 70% of domestic needs, with the rest coming from imports. Diammonium phosphate imports account for 25–30% of global trade.
Export demand is also playing a role. With domestic fertilizer prices lower than international levels, Chinese producers are increasingly focused on exporting. For instance, China's nitrogen fertilizers are highly competitive in the Indian market, where prices are higher in regions like the Middle East and Russia. As a result, India has become a major export destination for Chinese nitrogen fertilizers. This export-driven demand is exacerbating domestic shortages and pushing prices upward.
Experts warn that the sharp rise in fertilizer prices is harmful to farmers, who may see their production costs increase without corresponding income gains. This could reduce farmers’ enthusiasm for grain production and threaten national food security. To address this, relevant authorities should develop more effective control measures tailored to the domestic market. Recommendations include restricting the export of key fertilizers like urea and diammonium phosphate, suspending export tax rebates, maintaining seasonal tariffs on urea exports, and strictly controlling other fertilizer exports. At the same time, efforts should be made to boost domestic supply and ensure the quality and reliability of commercial reserves during off-seasons, so as to stabilize the fertilizer market.
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