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Fertilizer companies calmly consider new tariffs
The fertilizer industry is cautiously assessing the new tariff policy, which was announced by the Ministry of Finance on December 17, 2013. According to some executives from major fertilizer companies, while the policy is seen as a positive development for the sector, it should not be overestimated in its impact on the market. "The new tariff adjustments are good news for the industry overall, but we shouldn’t be overly optimistic or exaggerate their influence," said one executive during an interview with reporters on December 24. "There are many factors that determine the direction of the fertilizer market and the level of industry growth, and it’s definitely not just about tariffs."
The "new tariff policy" refers to the 2013 Tariff Implementation Plan, which came into effect on January 1, 2013. The plan includes measures such as lowering export tariffs on nitrogen and phosphate fertilizers. For example, urea exports with a base price below 2,260 yuan per ton will see their export tax reduced from 7% to 2%. Other nitrogen fertilizers, like ammonium chloride, will also face a 2% export tax during off-season periods. Additionally, the off-season period has been extended from four to five months, and the base price for diammonium phosphate (DAP) has been raised to 3,500 yuan per ton.
Yin Runsheng, executive deputy general manager of Shaanxi Coal & Chemical Suihua Group, noted that the plan has injected positive energy into the market and met expectations, helping stabilize and slightly boost fertilizer prices. He added that the reduction in export costs could benefit domestic fertilizer exports and ease the oversupply issue in the domestic market. However, he warned that the long-term effects of the policy should not be overestimated. “We need to consider how the international market will perform and whether there is still a gap between domestic supply and demand,†Yin said.
Xu Yanyu, deputy general manager of Jiangsu Linggu Chemicals, acknowledged the short-term confidence boost brought by the plan. Urea prices have rebounded from a low of 1,950 yuan per ton to around 2,160 yuan, with increased trading volumes. Yet she remains skeptical about the long-term impact. She pointed out that even with lower export taxes, rising transportation, labor, and logistics costs may offset any benefits. Moreover, the unpredictable nature of the international market and potential government interventions could further complicate things.
Hubei Yihua Group, a major producer of phosphate and compound fertilizers, shared similar concerns. Marketing minister Xiong Linchen noted that while the plan sets a higher base price for DAP, the domestic market is already oversupplied, and rising input costs limit profitability. Despite the 2% tax cut, the company believes it won't significantly improve export performance or change the current supply-demand imbalance.
Li Changxia, head of the sales department at Shandong Hongri Arkang Chemical Co., emphasized that the plan will have minimal impact on the compound fertilizer market. With limited potash exports and growing production in key markets like North America, Asia, and India, the global outlook remains challenging. Even with reduced export costs, Chinese companies may struggle to increase shipments significantly. Overall, the market structure is expected to remain stable, with raw material supplies sufficient for now.