Summary: China-U.S. Trade Frictions are Partly Good for Fertilizer Market, But Fertilizer Companies Still Need to Improve Themselves
Along with the outbreak of China-U.S. trade war, China would impose 25% taxes on importing agricultural products such as corn, soybean, sorghum and barley from the U.S., which would push up the overall prices of China’s agricultural products and improve farmers’ benefits and further stimulate fertilizer consumption.
In the second half of 2018, fertilizer for agricultural products will be mainly used for corn. During China-U.S. trade frictions, corn is an important target that is taxed. Ending stocks of corn in 2017/18 were negative, for the first time in the last seven years, and the gap reached up to 25.61 million MT. And meanwhile, corn consumption in 2017/18 increased by 10%, but the total output decreased by 1.7%, which would make corn be in a shortage of supply and bring feel-good factors for corn prices; in consideration of an increase in taxes on importing corn from the U.S., corn prices must be pushed up, which would stimulate fertilizer consumption.
Although China-U.S. trade frictions are partly good for fertilizer market, yet due to serious overcapacity and governmental coals of a reduction in use of fertilizer and an increase in efficiency, fertilizer companies need to cut down backward capacity; and meanwhile, the government is always advancing the activities of a reduction in use of fertilizer, and organic fertilizer instead of fertilizer, besides, the supply-side reform is continuing, so cutting down the use of fertilizer is an inevitable trend.
In the long term, domestic fertilizer companies need transforming and upgrading to comprehensive agricultural service suppliers from fertilizer producers, which can radically improve the technological content and the comprehensive utilization rate of fertilizer.