Fertilizer companies using natural gas as raw materials face market challenges

With rising oil prices and high levels of operation, the issue of low natural gas prices and unbalanced supply and demand in China has become increasingly prominent. In the long run, natural gas prices have large uncertainties and some room for growth.

Natural gas is one of the main raw materials for nitrogen fertilizer production and accounts for 1/4 of the raw materials for nitrogen fertilizer production in China. There are currently more than 20 sets of large and medium-sized nitrogen fertilizer production facilities using natural gas as raw materials, of which about half of the plants belong to local chemical companies and are sensitive to changes in natural gas prices. Sichuan Chemical Holding Group Corporation is a local chemical fertilizer production enterprise that uses natural gas as raw material. Its technological level is relatively advanced. It has 6 sets of large and medium-sized chemical fertilizer production equipment and more than 2 million tons of urea and ammonium nitrate production capacity. It consumes nearly 2 billion cubic meters of natural gas each year. In order to keep abreast of the impact of natural gas price changes on chemical fertilizer production, recently, Comrade Chen Shihai, deputy inspector of the Industrial Development Department of the National Development and Reform Commission, led the team to investigate the production and development of Sichuan Chemical Holding Group. Through discussion and discussion, we carefully listened to the views of local governments and production companies, and conducted in-depth field visits to observe the operation of production installations. We have a relatively clear understanding of the production and operation conditions and development of enterprises.

The situation shows that in 2006 the company's production and operations remained stable and the product sales were basically normal, but due to changes in the macro-control policies and changes in the relationship between supply and demand of chemical fertilizers, enterprises faced the dual pressure of rising raw material prices and falling product prices. It is expected that the natural gas prices for the whole year will increase by around 0.15 yuan/cubic meter year-on-year, the fertilizer price will drop by about 5% year-on-year, and the fertilizer production will be in a meager state. According to preliminary calculations, if the natural gas prices in the plant still increase in the same range in 2007, according to the current product prices, fertilizer production can only be guaranteed.
In response to the situation faced by enterprises, Comrade Chen Shihai pointed out that rising natural gas prices are an objective reflection of the laws of the market economy. Fertilizer companies must actively create conditions to meet new challenges. First, we must strengthen the operation and management of existing installations, strive to achieve a safe, stable, long-term continuous operation, reduce run, run, drip, leakage, and unplanned parking losses. Secondly, it is necessary to increase technological transformation to further reduce the consumption of raw materials and improve the ability to cope with rising raw material prices. Third, we must pay close attention to studying the structural adjustment program for raw materials, and constantly broaden the sources of raw materials to achieve the transition from high-quality, high-priced raw materials to cheaper raw materials. Fourth, we must actively extend the industrial chain, strive to increase the value of resource use, steadily promote the diversification of product structure, and effectively avoid the risk of raw material prices.

As the price of chemical fertilizers involves the country's preferential agricultural policies, it is difficult for the price of raw materials for fertilizer production to pass through the product smoothly. Therefore, it is necessary to actively promote the adjustment of raw materials structure of fertilizer companies. For a long time, China's chemical fertilizer production has always been in a state of low capital and profit, and companies have accumulated less and carried more burdens. The state should appropriately increase the support for the structural adjustment of raw materials for chemical fertilizer companies.