In early Dec. 2013, the China Petroleum and Chemical Industry Federation (the CPCIF) finished the compiling of the Thematic Research Report on Defusing Overcapacity (the Report). The Report documents the overcapacity problem and makes recommendations for the eight chemical industries that are most affected by the overcapacity problem, namely oil refining, nitrogen fertilizer, ammonium phosphate, chlor-alkali, sodium carbonate, calcium carbide, carbinol and silicon fluoride, according to CCM’s Phosphorus Industry China Monthly Report 1401.
The Report has been submitted to the National Development and Reform Commission (the NDRC), the Ministry of Industry and Information Technology of People's Republic of China (the MIIT), the National Energy Administration (the NEA), and the State-owned Assets Supervision and Administration Commission of the State Council (the SASAC). It has been distributed to regional industrial associations and industrial competent departments. The Report will be released after it has been unanimously approved by the relevant departments and authorities.
There are four general features of the overcapacity situation in the above mentioned eight chemical industries. Firstly, these industries are mainly traditional and basic industries. There is also a trend that some emerging industries are also becoming threatened by overcapacity. Secondly, the overcapacity in these industries is largely the result of structural problems—oversupply for low-end products and a supply shortage for high-end products. Thirdly, there are still too many small and uncompetitive companies in these eight industries. In other words, the degree of concentration in these industries is not high enough. Finally, the proportion of backwards production capacity involving antiquated methods in these industries remains high. Take the domestic calcium carbide industry for example, the use of internal combustion furnaces for production still accounts for 40% of the total calcium carbide production capacity.
Although the export tariff imposed on phosphate fertilizer will be sharply reduced in 2014, the domestic industry will remain encumbered with the issue of overcapacity for several years. Overcapacity is a root problem faced by China's phosphate fertilizer industry. In the first 11 months of 2013, the production volume of phosphate fertilizer was steady, while the export volume of DAP, which accounts for the majority of phosphate fertilizer exports, decreased by 16.48% compared with the corresponding period in 2012. Meanwhile, there was new DAP production capacity, with about 1 million t/a put into operation in 2013. Therefore the overcapacity in ammonium phosphate, which traditionally accounts for 80% of the production volume of the entire phosphate fertilizer industry, worsened during 2013.
The direct purpose of the Report is to reduce the ammonium phosphate fertilizer production capacity. The CPCIF has targets to reduce the overall production capacity of DAP from nearly 20 million t/a in 2013 to 15 million t/a, and the production capacity of MAP from nearly 17 million t/a in 2013 to 12 million t/a by 2015. The long-term purpose of the Report is to stimulate the phosphate fertilizer industry towards integrating, transforming and modernizing the industry.
The major challenge that the phosphate fertilizer industry faces is how to achieve the targets that have been set by the CPCIF. In the Report, some measures will probably be included, such as setting standards and thresholds to weed out backward production capacity and the rejection of applications for investment into new ammonium phosphate projects.
However, the government's policies will only have a minor and temporary effect. Any major integration or upgrade in China's phosphate fertilizer industry will depend on the private enterprises themselves. Private enterprises will need to adjust their product structures and drive technological innovation so that phosphorus resources are comprehensively used.
Table of Contents of Phosphorus Industry China Monthly Report 1401:
Newyangfeng Fertilizer approved to be listed by back door listing
Tianjin Tanyi develops a new technology to produce MKP by using yellow phosphorus tail gas
CPCIF compiles thematic report to ease the overcapacity in eight chemical industries
Phosphate fertilizer export tariff to be sharply reduced in 2014
New standard to regulate domestic single superphosphate market in 2014
Batian to invest in a giant synthesis ammonia project in Weng'an County, Guizhou Province
Kainlin Group to start the integration project of phosphorus and coal chemical industry in H2 2014
The first phosphate complex in South East Asia to be built in Malaysia
Yidu Dajiang to upgrade its phosphate compound fertilizer production devices
Iodine recycling item of Kailin Mining & Ferilizer to be put into operation in Feb. 2014
International trade of phosphate chemicals in Nov. 2013
Market review of prime phosphate chemicals in Dec. 2013
Price monitoring of phosphate chemicals in Dec. 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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