Import and Export of Chemical Fertilizers
By Long Wenjun

Potash fertilizers still have large deficit

The import of chemical fertilizers in China has presented a trend
of remarkable decline since 2002. The import amount was 16.874
million tons in 2002 and hovered somewhat lower at 12 million
-14 million tons from 2003 to 2005. Only 6.536 million tons were
imported in eight months from January to August 2006, and the
annual total is expected to be lower than 12 million tons in the
whole year of 2006.
   The supply and the demand of nitrogenous fertilizers in China
are basically balanced after 2003 and there is some export of
urea. Potash fertilizers still depend on import. The importation
of DAP (diammonium phosphate) has declined slightly whereas the
imported proportion of China's NPK (nitrogenous, phosphorus and
potassium) compound fertilizers is relatively stable.

Export varieties are relatively unitary

Since 2002, China's export of chemical fertilizers first
increased and later declined. The export amount was 2.573
million tons in 2002, increased to 7.3352 million tons in 2004
and dropped back to 4.6921 million tons in 2005. The export
amount was 2.9701 million tons from January to August 2006 and
is expected to be around 4.0 million tons for the whole year of
2006.   
   Export varieties of chemical fertilizers are mainly urea and
DAP in recent years. Urea accounted for more than 50% of all of
China's chemical fertilizer exports in 2003 and 2004. The export
proportion of DAP has been steady at 10%-20%.

Imports and exports are affected by various factors

    1. The sustained increase of production costs has affected
the global supply and demand of chemical fertilizers
The energy price is an important factor affecting the production
cost of chemical fertilizers. Due to the energy price rise,
chemical fertilizer producers in the United States and Europe
have reduced or suspended production. There is a supply deficit
in the international chemical fertilizer market and a good
opportunity has been provided to the export of chemical
fertilizers in China. The export of urea from China increased
dramatically in 2003 and 2004. With the impact from the
international market, however, prices of coal and natural gas
in the domestic market have also increased constantly. There is
a supply deficit of energy in local areas. As a result the
operating rate of domestic nitrogenous fertilizer producers has
reduced and there is a supply deficit in the market.

    2. China implements macro control policies for the import
and export of chemical fertilizers
With the policy support and guidance from the state, the chemical
fertilizer industry in China has achieved outstanding
development since the WTO accession. The drastic capacity
expansion of chemical fertilizers has relieved the
long-standing unfavorable situation of import dependence and
laid a foundation for export.
   According to WTO agreements, except for the small-volume
import of partial chemical fertilizers that belongs to
non-public enterprises, the import of all other chemical
fertilizers must be done by public trading companies. Such
trading companies are designated by the state. In this way both
the import price and the imported amount of chemical fertilizers
are effectively controlled and maintained at a relatively stable
level. China has adopted a policy of encouragement first and
restriction later to the export of chemical fertilizers. In the
initial years after the WTO accession, China offered subsidies
to chemical fertilizer producers through various measures such
as favorable prices of coal, steam, power and freight and refund
of value-added tax and also formulated export tax rebate policy.
With the supply deficit of chemical fertilizers from the end of
2004, however, China not only eliminated export tax rebate but
also increased tariff on the export of chemical fertilizers. The
export of chemical fertilizers has therefore been reduced
drastically. The capacity of urea production in China has
expanded rapidly in 2006, but due to the restriction of 30%
export tariff, the export of urea is much lower than in the
previous two years. The period from October to December 2006 will
be the slack season for chemical fertilizer production. To
encourage the export of chemical fertilizers and increase the
operating rate in chemical fertilizer producers, China will
reduce the urea export tariff rate to 15%.

    3. International trade of chemical fertilizers has brought
opportunities and challenges
Indonesia, traditionally a urea supplier to Asia, announced an
order forbidding the export of urea in the second half of 2003.
Some Southeast Asian countries such as Vietnam and Philippines
and Korea had to look for other suppliers. Owing to the low
freight cost, China became the country of first choice for import.
China's export of urea has therefore grown drastically. At a time
of global supply deficit of nitrogenous fertilizers, the Middle
East has used its advantage in oil/gas resources, actively
introduced advanced production technologies from abroad and
vigorously developed its own nitrogenous fertilizer production.
It has had a rapid expansion of nitrogenous fertilizer capacity
and will replace China to become the leading region for the
export of nitrogenous fertilizers.
   China's import dependence of potash fertilizers has reached
more than 70%. Policy changes of international potash fertilizer
suppliers seriously affect the import of potash fertilizers in
China. In the first half of 2006, China's imported amount of
potash fertilizers dropped by 30% compared with 3.742 million
tons in the same period of 2005. The main reason is the widespread
price rise made by international suppliers. Talks on the import
of potash fertilizers in 2007 will soon begin. It is expected
that international potash fertilizer suppliers will make
further price rises. The import of potash fertilizers in China
will meet severe challenges.

Table 1  Import Proportion of Chemical Fertilizers in Recent
Years          (%)
Year    Urea    DAP     KCl     NPK     Others
2002    4.70    29.29    39.54    16.77    9.70
2003    1.11    21.52    51.42    18.51    7.44
2004    0.31    18.45    57.98    16.52    6.74
2005    0.51    12.52    63.32    16.38    7.27
Source: CNCIC Chemdata

Table 2  Export Proportion of Chemical Fertilizers in Recent
Years                    (%)
Year    Triple    KCl     DAP     MAP     Urea    Others
2002    19.60    14.41    19.39    5.11&n