As the largest fertilizer producer and consumer in the world, China’s production capacity in nitrogen and phosphate is much higher than its domestic demand. This leads the country to depend on selling the surplus fertilizer on the export market.
However, the story is different with potash; its resources are limited and that has restricted its production capacity.
NITROGEN PRODUCTON AND EXPORTS
China has 23% surplus nitrogen production and a total of 600 nitrogen fertilizer producers. Sixty percent of the nitrogen production is urea, and production capacity has kept increasing every year. However, this forced some of the old or small facilities out of the market.
As production surplus and environment issues became problems in China, the government tried to adjust the industry structure by promoting new, efficient facilities and close old, inefficient ones.
“Our production capacity was 80.7 million (metric) tons in the year 2014. There was a new capacity of 6.0 mmt added to the industry last year, while 5.0 mmt of old capacity moved out from the market in the meantime; this year, we will have a new production capacity of 4.5 mmt operating, while 3.0 mmt of old capacity will be closed,” said Yibin He, marketing manager of Anhui Hongsifang Co., Ltd, one of the largest fertilizer producers in the middle of China.
“The total production capacity will reach 82.2 mmt at the end of 2015,” he said.
“However, China’s urea export this year will be only 11.5 mmt; this is much less than the figure of 13.6 mmt in 2014,” said He. “World market is very competitive, because there are more than 10 mmt of new production added to the world market this year.”
Statistics from China Customs Bureau show India was China’s largest urea export market last year, buying 7.3 mmt or 54% of total urea exports from China. He estimated 8.2 mmt of urea will be exported this year to India, or 71% of the total export volume.
“There will be a slower increase in production capacity in China in the next five years until the production capacity reaches the peak, as the government planned; after 2020, the production capacity is not going to increase, or will be lower,” said He, “China’s export volume may be less than 15 mmt in the future.”
PHOSPHATE PRODUCTION AND EXPORTS
Meanwhile, China has a phosphate production surplus of 26%.
As the world’s largest phosphate producer, China’s total phosphate production (calculated in phosphorus pentoxide production) was 16.9 mmt in 2014. This year’s production will be 12% higher, with a total production of 18.9 mmt, estimated He.
“China used to be a large phosphate import country before 2006,” said He, “but because of the government support, phosphate production increased greatly, from 0.12 mmt in the year 1961, to 7.28 mmt in 2000, 11.2 mmt in 2005 (this was the year China became the largest phosphate producer in the world followed by the U.S.), and now 19 mmt.”
However, the domestic demand for phosphate fertilizer is only 11 mmt. This created a big surplus of more than 6 mmt that could be exported to the world market.
With the production increase, the industry also consolidated in the past years. “Ten years ago, we have 1330 phosphate producers, most of them are small and lower technology producers. The adjustment of the industry had closed most of the non-efficient producers and left only 332 producers now. This process of adjustment is still going on and we are expecting that more than half of the producers will be out of the market by the year 2020 and only 150 producers will be left,” said He.
The Chinese government started to realize that exporting phosphate fertilizer is not a good strategy for the country, because of limited phosphate resources. “We have discovered 4 billion metric tons of phosphate resources in China. Most of the resources are allocated in southwest mountain area of China. With current production capacity, we will use all the resource in about 200 years. In the meantime, the freight cost also makes it not competitive in exporting,” said He.
“The new production facilities in other countries, such as Morocco and Saudi Arabia, will have more export advantage and will occupy some of China’s export market in the next several years,” said He, “We are expecting that the consolidation of China’s production and disadvantages in the international market will force the industry to cut some of the production capacities in the next five years.”
He added that China’s export volume is expected to decrease.
POTASH PRODUCTION AND EXPORTS
As for potash, China is expected to depend on imports for half of its domestic demand.
More than half of China’s farming land has a lack of potash, said He. “Currently, we are using more than 12 mmt of potash fertilizer each year.”
The potash resources in China are very limited. The total discovered is around 1 billion tons and more than 90% is distributed in the salty lakes in northwest China’s Xinjiang and Qinghai provinces.
China’s domestic potash (as potassium hydroxide) production grew fast in the past few years. The total production of 6.1 mmt in 2014 was almost triple its production in 2006, when total production was only 2.1 mmt. Total production for this year is estimated to be 6.2 mmt.
However, China’s potash production capacity will only increase to 6.3 mmt by 2020, according to China Inorganic Salts Industry Association (CISA).
As demand increases, China imports more potash every year. China imported 5.2 mmt of potash chloride in 2010, then 8.0 mmt in 2014 and this year is expected to import 8.9 mmt. The imported potash chloride is mostly from Belarus, Russia, Canada, Israel and Jordan.
“Potash importing will be a long trend in China. As potash resources are limited in the country, Chinese industry is engaged in many overseas investment projects to ensure future potash supply,” said He.
There are 26 overseas potash mining projects in different developing stages now; some of them are already in production. According CISA, these projects are located in Canada, Laos, Congo, Thailand, Ethiopia, Russia, Argentina, Iran and Kazakhstan. Four of the projects are operating now with a production capacity of close to 2 mmt potash chloride. The total production capacity of those projects will be 10 mmt upon completion.
China began to import potash chloride produced in Laos in 2014.
“Based on the Chinese farmers’ fertilizer usage ratio of nitrogen, phosphate and potash … China’s potash usage is still in a lower level,” said He. “The industry estimates that to increase China’s potash usage to a reasonable level, Chinese farmers will need another 5 mmt of potash to make a fertilizer balance.”