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"The new tariff policy is a positive development for the fertilizer industry, but it's important not to overestimate its impact. The market is influenced by many factors, and one policy alone cannot determine the future of the industry," said a senior executive from a major fertilizer company during an interview on December 24th.
The "new tariff policy" in question refers to the "2013 Tariff Implementation Plan" released by the Ministry of Finance on December 17th. According to the plan, export tariffs on nitrogen and phosphate fertilizers were reduced starting January 1, 2013. For example, the export tax on urea was lowered from 7% to 2% if the base price remained below 2,260 yuan per ton. Other nitrogen-based fertilizers, such as ammonium chloride, also faced a 2% export tax during off-season periods. Additionally, the off-season period was extended from four to five months, and the base price for diammonium phosphate (DAP) was raised to 3,500 yuan per ton. Potassium-based fertilizers, including potassium chloride, saw their export tariffs shifted from ad valorem to specific rates, with a flat 2,000 yuan per ton tax applied.
Yin Runsheng, Executive Deputy General Manager of Shaanxi Coal & Chemical Suihua Group, noted that the plan provided a positive boost to the market, aligning with expectations and contributing to recent stability and slight price recovery. He emphasized that the reduction in export costs could help ease domestic oversupply issues and support the overall market. However, he warned that long-term outcomes should not be overly optimistic. "We need to watch how international markets develop and whether domestic supply and demand remain balanced," he added.
Xu Yanyu, Deputy General Manager of Jiangsu Linggu Chemicals, agreed that the policy boosted confidence among dealers, leading to a rebound in urea prices from 1,950 yuan to 2,160 yuan per ton. But she also expressed doubts about the long-term benefits. She pointed out that transportation, labor, and other costs continue to rise, making it difficult for exports to become profitable. Plus, international demand remains uncertain, and increased domestic competition could prompt government intervention.
At Hubei Yihua Group, marketing director Xiong Linchen noted that while the base price for DAP was set at 3,500 yuan, current ex-factory prices are still around 3,000 yuan. Despite this gap, he warned that overcapacity in the domestic market limits price growth. Rising raw material and operational costs further weaken China’s competitive edge compared to foreign producers. As a result, the tax cut may have limited impact on exports.
Li Changxia, head of the sales department at Shandong Hongri Arkang Chemical, stated that the plan had little effect on the compound fertilizer market. With small potash exports, changes in tariff methods wouldn’t significantly alter the market. Moreover, with North American facilities expanding and countries like Vietnam and India increasing local production, international demand is unlikely to improve. Even with lower export costs, Chinese companies may struggle to boost exports. Overall, the market structure is expected to remain stable, with sufficient raw materials available for production.
Fertilizer companies calmly consider new tariffs