In the first half of 2010, China fertilizer cost steadily went up. Meanwhile, the situation of excess supply in the market continued. On the one hand, the production of fertilizer keeps rising. On the other hand, domestic consumption and export volume increased but still unable to release the pressure of excess supply. Prices of most fertilizer products are softening while cost is staying at a high level. That leads to the great shrink of profits in Chinese fertilizer industry.

 

In January to June 2010, the Chinese fertilizer production reached 33.456 million tons, up 5.2% on a year-on-year basis. The import volume reached 2.1 million tons, increase 41.7% on a year-on-year basis. The total supply in the first half of 2010 is 50.6 million tons, up 6.0% on a year-on-year basis. The consumption in the first half of 2010 is about 36.3 million tons, up 8.2% on a year-on-year basis. Export volume reached 1.76 million tons, up 37.5% on a year-on-year basis. The demand for fertilizers in the first half of 2010 is approximately 38 million tons, increase 9.3% on a year-on-year basis. Although the increase of demand is more than the increase of supply, the situation of excess supply has not changed.

 

BOABC estimates the balance between fertilizers supply and demand will not get worse. Above all, the increase of output will slow down due to decreasing profits. Particularly, nitrogenous fertilizer production is likely to drop substantially. Also, the consumption continues to rise due to falling prices. The total inventory of fertilizers would reach 17 million tons by the end of 2010. The ratio of inventory and consumption would be 28.1%. In the second half of 2010, prices of most fertilizers will remain at a low level. However, due to long-term rise of material prices such as natural gas, the profits will go down further.