The current spring season is typically the peak time for fertilizer sales, but Zhejiang's fertilizer companies are struggling to keep up. A recent report revealed that many local producers are operating well below capacity, with some even shutting down completely. According to Sun Zhixin, deputy secretary-general of the Zhejiang Petroleum and Chemical Industry Association, a comprehensive survey is underway to assess the industry’s performance. The findings indicate that most fertilizer companies in the province are running at less than one-third of their normal capacity due to rising energy costs and weak market demand.
Only two major urea producers, Sinopec Zhenhai Refining & Chemical Co., Ltd. and Juhua Group, are operating at full capacity. However, even these large state-owned enterprises are reporting slim profits or losses. They continue production largely out of a sense of social responsibility. Meanwhile, smaller firms producing ammonium bicarbonate and phosphate fertilizers are facing even tougher conditions, with many complaining about unsatisfactory profitability.
The challenges faced by Zhejiang’s fertilizer sector stem from three main factors. First, raw material prices have surged. Thermal coal and anthracite, key inputs for chemical fertilizers, have seen significant price hikes. Anthracite prices have risen by 30 yuan per ton this year, while phosphorus ore costs have exceeded 500 yuan per ton, making supply difficult. Second, market demand has dropped sharply. Last year, the national fertilizer market was tight, with prices soaring and government price controls being ineffective. This year, however, the situation is much cooler. Although urea prices remain stable, other fertilizers like phosphate and compound fertilizers are in oversupply, leading to lower margins.
Third, fierce competition from other provinces is taking a toll. Producers in the Midwest benefit from abundant resources, efficient railway transport, and lower costs. As a result, a large volume of fertilizers from outside Zhejiang is flooding into the local market, squeezing local producers. Additionally, changes in farming practices and reduced grain cultivation in Zhejiang have further decreased demand for chemical fertilizers.
Sun Zhixin notes that the fertilizer industry is inherently resource-intensive, and Zhejiang lacks the natural resources needed to support long-term growth. With electricity prices expected to rise following the liberalization of coal pricing, production costs will only increase. This means the industry’s future looks increasingly challenging. Without strong management and strategic advantages, Zhejiang’s fertilizer companies may find it hard to compete. To survive, they must find new competitive edges and adapt to the evolving market landscape.
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