Wednesday, February 20, 2013

China's phosphate fertilizer industry to usher in integration period

Owing to over capacity, China's phosphate fertilizer industry is about to see a period of consolidation full of industry structure adjustment and enterprises’ merger activities in the next three or five years, according to Phosphorus Industry China Monthly Report issued by CCM in February.
According to Li Shousheng, vice-chairman of China Petroleum and Chemical Industry Federation (CPCIF), China's phosphate fertilizer industry should tackle over capacity as a priority in 2013.
At present, the capacity expansion of phosphate fertilizer industry generally comes to an end in China. By the end of 2012, the capacity of phosphate fertilizer reached 23,600,000t/a in China, outstripping domestic demand by 10,000,000 tonnes.
In 2012, China's phosphate fertilizer production further concentrated in four prime provinces—79% of the phosphate fertilizer was produced in Hubei, Yunnan, Sichuan and Guizhou provinces, compared to 73.48% in 2011. Nonetheless, the market concentration of phosphate fertilizer was still low. According to data from China Phosphate Fertilizer Association, top ten phosphate fertilizer producers account for only 50% of the total output in 2012, far below the government’s 70% target.

No doubt those leading phosphate fertilizer producers would be the first batch of survivor during the industry shake-out period. While those small-scale phosphate fertilizer producers with certain upstream phosphorus resources would be likely to be the biggest potential takeover targets. As for those phosphate fertilizer producers without phosphate resources, they may be eliminated ultimately as a result of fierce competition.
Nevertheless, China’s phosphate fertilizer industry might experience a long period of consolidation. After all, the loss hasn’t spread throughout the industry under the current phosphate fertilizer market status and thus enterprises are lack of restructuring motivation.
However, it is believed that certain phosphate fertilizer players would be bound to seize the opportunity to consolidate. For instance, Hubei Yihua Group Limited Liability Company (Yihua Group), the biggest phosphate fertilizer producer in Hubei Province, is most likely to merge some phosphate fertilizer firms. According to the develop scheme of Yihua Group, it plans to expand its production capacity of phosphate fertilizer from 3,500,000t/a to 5,000,000t/a by the end of 2015. From the beginning of 2012, the construction of new phosphate fertilizer project has been forbidden in China within five years according to government plan, so Yihua Group has to rely on merger activities.

Editor's Note
Headlines of Phosphorus Industry China Monthly Report 1302
Phosphorus Ore
Company Dynamics: Hubei kicks off a reform on phosphorus resource tax
Company Dynamics: Kailin Group shows an ever-increasing capacity in phosphorus ore production     
Policy & Legislation: China makes efforts to get phosphorus resources replenishment 
Yellow Phosphorus   
Company Dynamics: Tianyi Chemcial completes acquisition of SHJPC      
Phosphate Fertilizer   
Industry Dynamics: China’s phosphate fertilizer industry to usher in integration period
Global Insight
Agriculture downturn in Japan drives down its phosphate demand
Supply & Demand  
Market review of prime phosphate chemicals in Jan. 2013  
Import & Export
International trade of phosphate chemicals in 2012   
Price Update
Price monitoring of some phosphate chemicals in Jan. 2013

Phosphorus Industry China Monthly Report, issued by CCM on 15th, keeps providing the latest company dynamics related to China’s phosphorus industry, and market analysis on supply and demand, import and export as well as global insight.

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