The removal of export taxes on chemical fertilizers, the enactment of the “Soil Pollution and Control Law”, and series of new/revised fertilizer standards are bringing far-reaching effects on Chinese fertilizer market, which is invariably moving towards rationalization, high-efficient, specialization and greenization. This article offers an overall conclusion on the likeliest regulatory and market outcomes in 2019, as well as an in-depth analysis of the new tendencies.
Liberalization on secondary/micronutrients claim
The labeling and marking of all commercial fertilizers should conform to the national standard, “GB 18382-2001 Fertilizer Marking: Presentation and Declaration”. The mandatory standard was promulgated by AQSIQ (now known as SMAR) as early as 2001 when China has not yet developed intact and unified testing methods for secondary/micronutrients. Expedient measures were adopted to protect growers from being misled:
- Compound or complex fertilizers containing secondary/micronutrients are generally prohibited from claiming on their medium/micronutrient content;
- Secondary nutrient fertilizers should mark the name and content of each secondary nutrient as well as the total secondary nutrient. If a secondary/micronutrient in a secondary nutrient fertilizer is below 2%/0.02%, the fertilizer shall not be marked with the secondary/micronutrient;
Along with the scientific development and the market penetration of secondary/micronutrient fertilizers, both the growers and fertilizer producers have realized the importance of secondary/micronutrient in agricultural production. In late 2017, MIIT and 12 other ministries drafted an amendment to GB 18382, which has been submitted for final approval. The amendment removed the restriction on secondary/micronutrient claims. Considering the time required for a compulsory standard nationwide, the revised standard is very likely to be promulgated this year.
Biostimulant is rising up the legislative agenda
Biostimulants consist of a variety of biological substances, microorganisms and compound that directly applied to crops, seeds or soil to improve crop vigor, yield, quality and tolerance to abiotic stress, but do not necessarily related to nutrient performance directly. These novel products have rapidly grown in developed countries for sustainability consideration. Nevertheless, biostimulants are comparatively difficult to spread in China due to the legal gap: it can neither be classified as pesticide nor classified as conventional fertilizers. Currently in China, biostimulants can only be registered under compulsory generic names including water-soluble fertilizers containing amino-acids, water-soluble fertilizers containing humic-acids and water-soluble organic fertilizers (fertilizer containing alginic acid, chitosan, glutamic acid and polyaspartic acid and other ingredients which has not yet developed with compulsory quality control standard) or microbial fertilizers(microbial inoculants, compound microbial fertilizers and microbial organic fertilizers). The real situation is that most biostimulants need to be discussed during the plenary session of the National Expert Committee on Fertilizer Registration and only half of them can finally be approved.
Leading Indigenous enterprises have become aware of the legal constraint and series of advocacy campaigns were launched in 2018. The National Standardization Technical Committees of Fertilizer and Soil Conditioner has appealed to complete the top-level designing based on China’s farming characteristics and operational rules product definition, administrative procedure, testing method and review criteria.
After a nine-month-long negotiation with Belaruskali(a large Belorussian potash supplier), China signed an import contract at a favorable price of only $290 per ton(Cost and Freight) for FY 2019. Despite it was about $60 higher than a year ago, the price is still at a low level compared to other export destinations. Considering the strong global demand and the temporary downturn in domestic market, the import price would reach a record high of $ 300 per ton.
Technical criteria for organic fertilizer
In 2017, China put forward the action plan to replace chemical fertilizer with organic fertilizer, whereas the current implementing standard for organic fertilizer was developed in 2012, which was developed to improve soil organic matter content by maximizing the re-utilization of solid organic wastes. Most producers are SMEs and it is also difficult to guarantee the raw material, production technology and product quality. MoA (now known as MoARA) has already said it will further revise the standard with refined criteria for product classification, quality rating, raw material and more stringent quality index. The Ministry has also finished a preliminary study on nutrient indicator, heavy metal content, hygiene safety, environmental performance and risk assessment for different raw materials.
Environmental regulation has accelerated the obsolescence of outdated production facilities. In Aug 2018, 620 chemical factories were shutdown and suspended 2,614 plants were suspended in Shandong. In response to the special campaign launched by Guangdong Ecology and Environmental Agency, 4,824 enterprises were rectified in Dongguan city.
Fertilizer producers are not immune. China’s nitrogen fertilizer capacity was 60 million ton per year and the number of producers reached up to 200 and the production has recessed to 50 million ton per year and only 60 producers. The consolidation in production has forced traditionally fertilizer producers to move into new areas such as compound fertilizers and water-soluble fertilizers.
On 1 Jan 2019, China adjusted the export tax policy and exportation of chemical fertilizers has enjoyed a tariff-free treatment, which will exert significant influence on potash, compound fertilizer and rock phosphate. China improved production of potash including and processed potassium sulfate, potassium nitrate and granular potash, etc. The tariff cancelation would reduce export cost for about 600 Yuan per ton and more producers would resume production. China’s chemical fertilizer export has declined for 4 consecutive years and the tariff policy would help to reverse the downward trend but overall recovery is still subjected to global demand.
Southeast Asia market
Southeast Asia has a high number of agricultural countries with relatively lower fertilizer production level. In the effect of the "Belt and Road" construction and the establishment of China-ASEAN Free Trade Area, China increased crop farming investment overseas, which gives rise to lager fertilizer demand in this region. It is estimated that the chemical fertilizer demand of Thailand is 6 million ton per year and the market scale of Philippines is 4.7 million tons annually. Vietnam imports 1.5 to 1.8 million tons of urea and 0.7 million tons of di-ammonium phosphate and 0.2 million tons of compound fertilizer and the importation from China has nearly doubled during the first three quarters of 2018.
E-business in agricultural
According to the latest report on China’s farmland use transaction, the percentages of farmland transferred to large farmers, agricultural cooperatives/enterprises and other sized entities were 55%, 32% and 13%. The numbers of large-scale farmers, middle-size growers and agricultural cooperatives/enterprises have grown to 4 million, 30 million and 2 million. The scale farming and professional development demands more diverse and integrated agricultural services than agricultural inputs and traditional online store have been unable to meet such needs. A few internet enterprises have begun to explore range including agro-technique intelligence, branding and marketing agricultural products. Besides, finical service, precision farming, digital farming, agricultural informatization are considered to be the new impetus for E-business.
Retailers and direct-selling
The large growers and agrochemical enterprise are seeking more direct collaboration due to the escalating costs of raw material, energy and human resource, facilitated by the increasing trade shows throughout the country. The reduction in distribution channel would squeeze the profit and market percentage of small retailers, who can offer neither agricultural service nor credit sale to large-scale farmers. It is estimated that numerous family-run retailer shops will be eliminated from the market.
By the end of 2018, China’s microbial fertilizer production capacity has reached 30 million tons per year, accounted for 70% of all novel fertilizers. The number of microbial fertilizers approved for registration has increased from 3,505 in 2017 to 9,193 in 2018 and poised to exceed 10,000 by the end of 2019. Compared with conventional fertilizers, microbial fertilizer has advantages in ecological protection, agricultural waste utilization, agricultural product quality and nutrient improvement. The enactment of “Soil Pollution and Control Law” on 1st Jan 2019 would induce unprecedented demand for soil bioremediation in China and more capital will be poured into microbial fertilizers.