Tariff Increase to Curtail China's Fertilizer Exports

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Researched by Industrial Info Resources (Sugar Land, Texas)--The National Development and Reform Commission (NDRC) is now enforcing new tariffs on all nitrogen, phosphorous, and potassium fertilizers. Export duties on all nitrogen, phosphorous and potassium fertilizers will range from 100% to 135%, banning exports of chemical fertilizers from China. The new tariff will remain in place until the end of September. According to a Chinese petrochemical analyst, this will prompt China's chemical fertilizer industry to further realign. An analyst at China Merchants Securities said big companies like Sinofert Holdings Limited will most likely use this opportunity to realign its business.

International chemical fertilizer prices considerably increased in 2007. While Brazilian ammonium phosphate was being sold at $1,200 per ton, China's domestic price for the same product was only $600 per ton. Though the Chinese government policy requires ensuring domestic supply first, many fertilizer manufacturers still sell part of their products to other countries. In 2007, the total chemical fertilizer export from China was more than 10 million tons.

Urea production in China mainly uses coal and natural gas as raw material. Coal-based urea production capacity accounts for 60% to 65% of China's urea capacity. The increase in coal prices has directly pushed up the cost of urea production. In 2007, because of the constant price hike in coal, the cost of urea production in China went up by 3%, reaching $200 a ton. At the same time, international urea prices soared. The FOB price for urea in the Middle East at the same time went up from $220 to $360 a ton, a 64% increase. In the first two months of 2008, China exported 1.71 million tons of urea, a 250% increase from the same period in 2007. High export volume created a supply shortage on the domestic Chinese market. Presently, the factory price of urea is almost $300 a ton. After the 100% tariff imposition, export prices will exceed the international price of $480-$500 a ton.

Fertilizer export restrictions are deemed necessary to keep the domestic price down.

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