Market-oriented Pricing System to Form for Fertilizer     

The Chinese government will accelerate forming a market-oriented pricing mechanism for fertilizers, according to a standing meeting of the State Council on December 24th, 2008.
   The ex-factory prices for all fertilizers and the port prices (general trade) for imported fertilizers except for potash fertilizer will be set by the market instead of the government at appropriate time. The government will no longer practice temporary price controls on fertilizers in the production and distribution stages, while maintaining appropriate price regulation on imported potash fertilizer, which has a relatively high market concentration rate.
   China should properly control the capacity expansion for phosphate fertilizers and nitrogenous fertilizers, while step up resources exploration for potash fertilizers to orderly increase production. In addition, the farmer subsidy system should be further improved to make sure farmers' income would not be affected by the rising prices of fertilizers and pesticides.
   In a bid to push forward the reform in fertilizer distribution, which includes sales, logistics and storage, the government will allow a wide range of investors to enter the sector. This will encourage and support the development of large scale fertilizer distribution firms.
   China will also reinforce regulation and control on imports and exports as well as on reserves for fertilizers. The government has required that fertilizer stockpiles during the winter of 2008 and spring of 2009 should surpass 20% of the domestic fertilizer demand for spring-use.
   The local governments will also guide farmers to fertilize in a scientific way and give more supports on formulating fertilizer by soil compositions as well as expand the scope for subsidies, aiming to save spending for farmers while reducing negative impact on the environment.
   Industry insiders said that easing prices on fertilizers won't have substantial impact on producers while less government intervention will help reflect the price leverage and optimize the allocation of resources.
   Many fertilizer producers which have yet to use up their raw materials stockpiles bought at a high price could face even more difficulties in 2009 when fertilizer prices may further decline.