1. Summer tube fertilizer
Food is the most important thing for the people, and agriculture is stable and safe. Chemical fertilizer plays an important role in agricultural production. Proper application of chemical fertilizer can increase a certain amount of grain output. In order to ensure the stability of chemical fertilizer prices and protect the enthusiasm of agricultural production, since the second half of 2021, the national development and Reform Commission has established a working mechanism to ensure the supply and price of chemical fertilizer with relevant departments and units, carried out a series of work to ensure the supply and price of chemical fertilizer, and introduced the temporary reserve system of summer managed fertilizer for the first time at the end of 2021. The total reserve is 3.27 million tons, with the storage time from January 8 to February 28, 2022, the storage time from March 1 to May 31, 2022, and the expiration time of the reserve is June 1, 2022.
The purpose of the state's introduction of summer tube fertilizer is to ensure supply and stable price. From January to February of the storage period, the domestic agricultural demand is in the off-season. Because of the increased reserve function of the market reservoir, the urea price in the mainstream region basically fluctuates in a small range around 2600 yuan / ton. In June, many places in China are in the peak season of top dressing in summer. The release of summer tube fertilizer has promoted the fall of the high price of urea to a certain extent, thus protecting the enthusiasm of farmers to produce fertilizer.
2. Escalation of the conflict between Russia and Ukraine
In mid February 2022, the Russian Ukrainian war broke out, and the global pattern of fertilizer, grain trade and shipping changed, which in turn affected the trend of fertilizer market.
Therefore, in mid February, the global international market bottomed out and rebounded until mid March. Why the global fat market reacted so strongly depends on the next data.
Russia and Ukraine are one of the most important producers of agricultural products in the world. Russia is the world's largest wheat exporter, exporting 32.9 million tons of wheat in 2021, equivalent to 18% of the global trade volume; Ukraine is the sixth largest wheat exporter in the world. In 2021, it exported 20million tons of wheat, equivalent to 10% of the global trade volume.
As the most important fertilizer supplier in the world, Russia has an annual output of more than 50million tons of fertilizer, accounting for 13% of the global fertilizer output. According to the data of the United Nations agricultural organization, in 2021, the export trade value of nitrogen, phosphorus and potassium fertilizers in Russia ranked among the top three in the world, accounting for 15% to 20%. The export volume of urea in 2020 and 2021 was 7.292 million tons and 6.97 million tons respectively, accounting for 14% of the global urea trade volume.
In addition, Russia was the world's largest natural gas exporter in 2021, the second largest exporter of crude oil and condensate after Saudi Arabia, and the third largest exporter of coal after Indonesia and Australia.
The instability of geopolitical conflicts has directly led to the rise of global commodity, food and energy prices. Coupled with the impact of the COVID-19, it has exposed a series of problems of global food security. In order to ensure China's food security, it is imperative to ensure the supply and price of chemical fertilizers.
3. Grain subsidies
On March 11, 2022, according to the Ministry of finance, in order to alleviate the impact of the increase in grain production costs caused by the rise in the price of agricultural materials, stabilize farmers' income and mobilize farmers' enthusiasm for grain production, the CPC Central Committee and the State Council made decisions and arrangements, and the central government allocated 20billion yuan of funds to provide one-time subsidies to farmers who actually grow grain.
On May 22, 2022, according to the decision-making and deployment of the Party Central Committee and the State Council, and taking into account the market price trend of agricultural materials and the situation of agricultural production, the central government issued a fund of 10billion yuan to issue a one-time agricultural materials subsidy to farmers who actually grow grain again, support summer harvest and autumn sowing production, alleviate the impact of increasing expenditure on growing grain caused by the rise in agricultural materials prices, and further mobilize farmers' enthusiasm for growing grain.
The object of grain subsidies is actual grain growers, which to a large extent reduces the production cost pressure brought by the rise of agricultural materials prices to Grain Growers, so as to effectively protect the enthusiasm of fertilizer for agricultural production, stabilize agricultural production, and provide a solid bottom support for stable and increased grain production.
4. Epidemic outbreak
Since February, the COVID-19 has occurred frequently all over the country, and it peaked from March to May. The main areas involved Jilin, Shanghai, Guangdong and other places, and many other areas have also been affected. Then, under China's strong epidemic prevention and control policies, this round of epidemic began to decline after entering may. However, at this stage, industrial and agricultural production, logistics and transportation in many areas have inevitably been affected.
At the time point around April, the return of green manure in mainstream areas has just passed, and the fertilizer preparation in summer is still early, so the impact on agriculture is relatively general. However, the northeast region is approaching the planting season (started around May), and the poor logistics in April has delayed the Northeast season to late April to early May, resulting in a wave of concentrated rising prices.
On April 22, the Ministry of agriculture and rural areas held a video scheduling meeting on spring farming production and supply guarantee of "vegetable basket" products in key areas, emphasizing that we should actively respond to the impact of the epidemic, do a good job in spring agricultural production without delaying the agricultural season, and ensure a bumper harvest of grain throughout the year and a stable supply of "vegetable basket" products. With the transmission of policies, the overall progress of agricultural production in spring basically ended smoothly, and the impact in some regions was obvious, resulting in short-term shortage. However, with sufficient supply in the fertilizer market, the rising market gradually returned to the mainstream level.
5. Zero tariff will be implemented for coal import from May
On April 26, the Tariff Commission of the State Council announced on adjusting the import tariff of coal: in order to strengthen the guarantee of energy supply and promote high-quality development, the Tariff Commission of the State Council decided to implement a provisional import tax rate of zero for coal from May 1, 2022 to March 31, 2023 according to procedures. According to the schedule of the announcement, the imported coal that originally implemented the MFN tax rate of 3%, 5% or 6% will be subject to the temporary import tax rate of zero this time.
The raw material of urea production is mainly coal or natural gas. China's energy situation of "rich coal, poor oil and little gas" determines that the production of urea is mainly coal, supplemented by natural gas. According to Longzhong data, the total production capacity of domestic urea exceeds 70million tons, of which coal technology accounts for about 74%.
Although China's current coal reserves are still large, the increasing demand for coal year by year also increases China's import volume year by year, from 280 million tons in 2018 to 320 million tons in 2021.
With the outbreak of the situation between Russia and Ukraine, the global energy and food markets have fluctuated significantly. In the follow-up, the relevant conflicts and sanctions will continue, and the tension between supply and demand in the energy field will be difficult to ease temporarily. In this context, the active protection of imports is also based on the consideration of ensuring the supply and price of coal. Coal is also the raw material for many important chemical and chemical fertilizer products. The supply and price fluctuations in the coal market are bound to affect the fluctuations of downstream products. Chemical fertilizer is related to grain production. The premise of ensuring the supply of chemical fertilizer is that raw materials are sufficient and the price is stable. Therefore, it is urgent to ensure the supply and price of coal.
6. Shanxi fixed bed capacity exit
On May 18, the office of Jincheng Municipal People's government issued a notice on the 2022 action plan for the improvement of air quality, the consolidation and improvement of water environment quality and the prevention and control of soil pollution in Jincheng. Part of the notice: it is required to phase out all fixed bed intermittent gasifiers by the end of September 2024, including 26 fixed bed intermittent gasifiers by the end of December 2022.
According to Longzhong data, Shanxi's total urea production capacity is 8.67 million tons, ranking third in the country, of which 90% of the production capacity is fixed bed process, that is, by the end of 2024, most units will complete technical transformation and upgrading. The earliest large-scale upgrading of urea production capacity began with the supply side reform of the industry in 2016. In the past two years, the proportion of fixed bed production capacity has decreased from more than 50% to about 30%. With the alternation of new and old production capacity, the trend of total production capacity has slowed down in the past two years. At present, most fixed bed capacity has been transformed in succession, and the completion time node is basically concentrated in 2023-2024. It is estimated that the total domestic urea capacity in the next few years will change in the range of 70-75 million tons. It is possible that during 2023-2024, due to the centralized replacement of the old and the new, the total output will fluctuate significantly.
7. The daily output of urea exceeds 170000 tons
According to Longzhong data, on June 4, the daily output of the domestic urea industry exceeded 170000 tons, which is the first time that the daily output of the industry has exceeded 170000 tons since 2017, and it also basically operated around 170000 tons in the next ten days, reaching a maximum of 172000 tons. This is mainly due to China's supply guarantee policy, including but not limited to the supply of raw coal, the decline in the intensity of industrial policy to limit production, etc. at the same time, the considerable profits of the urea industry and the expected increase in agricultural demand have further promoted the realization of high construction in the industry. More importantly, not only has the daily output reached a higher level over the years, but the temporary control of China's Urea Export has also increased the domestic supply of about 2million tons.
In general, with the guidance and support of a series of relevant national policies, the supply and price stability of the fertilizer industry has achieved success, which has escorted the stable production and increase of grain in China and the safety of grain.
Article source:FSHOW
