Fertilizer enters a new round of mergers and acquisitions

From the perspective of the country's "three rural" policies and the overall situation of stabilizing prices, the decline in fertilizer prices is in line with the overall interests of the country. However, for fertilizer companies, the opposite is true and it is now predictable. After the implementation of the new export tariffs, many urea exports will be sold domestically. In the situation where China’s production capacity exceeds demand, it will inevitably bring about price competition. Under the high price of coal and low price of fertilizer chemical fertilizers, the use of bituminous coal as a raw material fertilizer company does not rule out the possibility of reducing profits and thus reducing production, contrary to policy expectations.
In fact, after the tariff policy came out, the person in charge of major fertilizer companies expressed this concern. Liu Shulan, vice chairman of the China Nitrogen Fertilizer Industry Association, also believes that now the industry has just picked up and tariffs have been adjusted again. I am afraid domestic production and circulation companies will lose confidence and affect basic supply.
This particularity of the fertilizer industry may force the government to maintain a “preservation pressure and pressure protection” mentality, the essence of which is “priority domestic, cheap supply; a small amount of exports, high-income income.” Based on this understanding, CICC analysts believe that if the domestic "Wu Chuan" starts smoothly, it is unlikely that the government will issue a follow-up stringent policy. The possibility that the export window will open shortly in the first half of next year still exists.
“From the present situation, the export has basically stopped, the price increase has been contained, and the government has initially reached the expected target of this policy. More policies will emerge in the form of psychological influence and guidance.” Shen Jianhua said, “This The tariff adjustment of chemical fertilizers is still very humane. The period from December 1st to December 31st is actually a window for fertiliser exporters.
On the other hand, “Price increases will see demand, and prices will drop depending on costs”, and many industry insiders believe that the market is facing a sharp reduction in fertilizer prices. One side is the demand for winter storage and stock-outs, and the other is the rise in upstream price costs. Looking at long-term trends, fertilizer prices will also increase.
In order to prevent the domestic market from being in short supply due to a large number of exports or because of the rapid increase in prices of products driven by exports, it is expected that such “direct and effective” special export tariffs on fertilizer products will become the norm. Related industry sources believe that under the circumstances that export special tariffs have become the norm, the price increase of nitrogen fertilizers and phosphate fertilizers will be greatly inhibited. Under the upward trend of industry costs, the overall profitability will show a downward trend, and the situation of small and medium-sized fertilizer companies will be “ Sufficiently subsistence lines, "relevant resources or technological advantages. Large enterprises can maintain profits beyond the industry average, the industry may enter a new round of mergers and acquisitions, reshuffle.

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