Domestic Nitrogenous Fertilizers Were Oversupply in 2015

By Han Jian

The nitrogenous fertilizer sector in China continued the overall increase of both capacity and output in 2015. The supply amount of quite a few varieties of nitrogenous fertilizer hit the new historical high. The supply amount of nitrogenous fertilizers (100%) was nearly 54.0 million tons in 2015, an increase of 1.8% over 2014. Table 1 shows the new added capacity of urea in China in 2015.
The new added capacity of urea in China was around 6.67 million tons in 2015, accounting for 7.4% of the total.
The sustained capacity expansion of nitrogenous fertilizers in China led to prominent capacity surplus. A capacity of nearly 20.0 million t/a was in surplus in 2015, increasing by 2.1% over 2014.

The development of new products met setbacks

Figure 1 shows the capacity and output of major nitrogenous fertilizers in China during 2014-2015.
Judging from the product structure of nitrogenous fertilizers, there were still mainly traditional single-component fertilizers in 2015. The proportion of high-concentration varieties of nitrogenous fertilizers went further up. The domestic capacity of urea reached the historical highest of 89.0 million t/a and the output also increased to the new high of nearly 70.0 million tons. The capacity of ammonium sulfate went up to 12.2 million t/a and the output increased to 7.54 million tons. The capacity of ammonium bicarbonate dropped to 14.55 million t/a and the output also made a downturn to less than 12.0 million tons. The capacity of ammonium chloride dropped to less than 15.0 million t/a and the output came down to a little more than 13.0 million tons.

Table 1   New added capacity of urea in China, 2015           (kt/a)

Producer    Capacity     Raw
material    Specification    Startup
date
Henan Jinmei Tianqing Coal Chemical Co., Ltd.    520    Coal    Small granule    February 2015
Hebei Yangmei Zhengyuan Chemical Group Co., Ltd.    800    Coal    Small granule    May 2015
CNOOC Heilongjiang Huahe Coal Chemical Co., Ltd.    800    Coal    Large granule    May 2015
Inner Mongolia Elion Resources Group Co., Ltd.    520    Coal    Medium granule    May 2015
Inner Mongolia Erdos Chemical Industry Co., Ltd.    950    Gas    Medium granule    June 2015
Xinjiang Xinlianxin Energy Chemical Co., Ltd.    480    Coal    Small granule    August 2015
Xinjiang Zhongneng Wanyuan Chemical Co., Ltd.    600    Coal    Small granule    October 2015
Jiangsu Linggu Chemical Co., Ltd.    900    Coal    Large granule    November 2015
Sinochem Jilin Changshan Chemical Co., Ltd.    300    Coal    Small granule    December 2015
Shandong Runyin Biochemical Co., Ltd.    800    Coal    Large granule    December 2015



The capacity proportion of small granule urea was down whereas the capacity proportion of medium granule urea and large granule urea presented an evident rising trend. The capacity proportion of small granule urea was dropped 3.8 percentage points to 77.2%. The capacity proportion of medium granule urea and large granule urea was increased by 3.1% and 1.2% respectively.
The output of new-type urea (value-added urea) was around 3.0 million tons in 2015, an increase of 20% over 2014. Constrained by development environments, other varieties such as urea ammonium nitrate solution (UAN) and vehicle urea failed to have good market performance either.
The nitrogenous fertilizer sector in China entered the period of integration after 2010. The Ministry of Industry and Information Technology of China issued the “Conditions for the Admission to the Ammonia Sector” in 2012. Under the rule, new synthetic ammonia units with natural gas and lump anthracite as raw materials were not allowed to be constructed in principle. As a result, the capacity of nitrogenous fertilizers was managed to be optimized and the domestic nitrogenous fertilizer sector has been upgrading.
The raw material structure for nitrogenous fertilizer production was further readjusted. Number of nitrogenous fertilizer enterprises using coal as raw material has been growing over past years while the capacity with natural gas as raw material presented a trend of sustained recession. The capacity proportion of synthetic ammonia with coal as raw material was 75.3% in 2015. The capacity proportion of synthetic with natural gas as raw material dropped 1.8 percentage points to 22.5%. The capacity proportion of synthetic ammonium with coke oven gas as raw material went slightly up to 2.2%. In the capacity of synthetic ammonium with coal as raw material, the proportion of enterprises using lump anthracite as raw material reducted whereas that using non lump anthracite as raw material increased. It would also become a future development trend. In the new added capacity of urea in the nation 2015, most units used the powdered coal pressurized gasification technology. Compared with traditional urea units using natural gas and lump anthracite as raw materials, such new projects have remarkable advantages in raw material and production cost.
Nearly a hundred enterprises with a total capacity of over 1.4 million t/a (100%) quitted from the nitrogenous fertilizer market in 2015. The total new capacity, however, exceeded 3.5 million t/a.

The export amount hit a new high

The export amount of nitrogenous fertilizers in China increased in 2015. The export amount of urea climbed to 13.75 million tons. Of the total, the export amount of large granule urea was nearly 5.0 million tons, hitting a new historical high; that of ammonium sulfate increased 27.1% from a year earlier to 5.28 million tons; that of ammonium chloride went up by over 70% year on year to nearly 1.0 million tons; that of urea ammonium nitrate solution (UAN) reached 410 kt, surging over 80% year on year. Ammonium nitrate was the only nitrogenous fertilizer variety whose export amount had a negative growth and its export amount fell 24% from the previous year to 320 kt.
Export amount of some nitrogenous fertilizer varieties hit a new historical high, but export prices of major varieties presented a declining trend. The average export price of urea in China was US$286.5/t (FOB) in 2015, a drop of 2.7% from 2014. The average export price of ammonium chloride was US$116.3/t, down 8.6% from the previous year. The average export price of ammonium sulfate was US$132.7/t, up 4.7% annually. The average export price of ammonium nitrate was US$343.0/t, increasing 2.1% yearly. Figure 2 shows the details.

Prospect for 2016

In 2016, the domestic nitrogenous fertilizer sector is expected to eliminate a capacity of nearly 2.0 million t/a for urea, over 3.0 million t/a for ammonium bicarbonate and 400 kt/a for ammonium chloride. Outdated capacities of ammonium sulfate and ammonium nitrate will also be eliminated by different extents.
Total new capacity of urea in China will be 16.82 million t/a during 2016-2017. Only an ammonia unit that is already completed but has not yet started production in Ningxia region uses natural gas as raw material. All other units use coal as raw material.
It is expected the capacity of synthetic ammonia with non lump anthracite as raw material to increase 1.7% annually in 2016.
The output of low-concentration and single-component nitrogenous fertilizers will make a further reduction. The development of new-type (value-added) varieties and water-soluble varieties of nitrogenous fertilizers will be highlighted. It is expected that the net increase of the urea capacity will be over 5.0 million t/a in 2016 and the proportion in the total amount of nitrogenous fertilizers will also go up to 67.1%.
Supply amount of urea ammonium nitrate solution (UAN) will also likely have a further increase. The supply amount of ammonium carbonate will continue to drop.
In terms of downstream demand, the total demand is expected to increase at a low growth. The implementation of the “Action Scheme for the Zero Growth of the Chemical Fertilizer Application Amount by 2020”, will bring to reduce the downstream demand of traditional nitrogenous fertilizers. It is expected the total demand of nitrogenous fertilizers (100%) to be 38.0 million tons in 2016, down 1.3% from the previous year. The market stock in 2016 is expected to be higher than 2015.