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Fertilizer Investment Research Quarterly Report

By CnAgri 2009-08-12 15:15:00 Print Tel:861064402118-822 Email: chen.wang@boabc.com

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Keywords:Fertilizer Investment Research Report China
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Brief Introduction:

BOABC is the first company launching the prosperity index in China based on industrial chains. The index takes key indicators out of the entire industrial chain, bearing in mind material supply and market application to set up a supply-demand model for the predication of future trends. The index can facilitate investors to make comparisons between various industries and capture goods opportunities for investment. Emphasis on analysis of the fundamentals. Analyze the value of a given industry from the perspective of the fundamentals and recommend key companies. Policy analysis and predictions of policy trend. Analyze impacts on industries of the latest relevant policies and predict future policies. Predictions of industrial development. Our authoritative analysts predict development trend of industrial demands, supplies, prices, sales volume, profits, etc.

Table of Contents:

BOABC Focal Viewpoints
I. Prosperity Index of Fertilizer Industry
1. Prosperity Index of Fertilizer Industry: bottom hitting in Q1 of 2009, stabilization and rally expected in Q2
2. Research on Fertilizer Demand
Drivers of Fertilizer Demand: acreage, ratio between grain and fertilizer, and fertilizer export
Grain Production Level: 5.4% growth of grain production in 2008, and production in 2009 is projected to be similar as in 2008
Ratio between Grain and Fertilizer: the rising of the ratio in Q1 of 2009 was conducive to mobilize farmers to buy more fertilizer
Fertilizer export: export in Q1 2009 fell sharply from Q1 2008 except for DAP
3. Research on Fertilizer Supply
Drivers of fertilizer supply: abundance of raw material supply, stock and import volume
Abundant supply of coal and natural gas, 5.7% growth and 7.5% growth respectively 
in Q1 2009
Sulphur Production: 2.4 million tons production in 2009 is expected, the rate of dependence on import to fall to 78%
Pyrite Production: 0.6% less production in Q1 2009 than Q1 2008, the falling rate slowed 
down
Phosphorus Ore Production: 2.9% growth in Q1 2009 than Q1 2008, a rally was seen
Ratio between stock and consumption: stock pressure still big
Still surplus production capacity of nitrogen fertilizer, the ratio between stock and consumption in 2009 to rise to 30.7%
Serious surplus of production capacity of phosphate fertilizer, the ratio between stock and consumption to rise to 23.6% in 2009
Still serious shortage of production capacity of potash fertilizer, the ratio between stock and consumption to fall to 11.1% in 2009 due to restraint of import
Compound and mixed fertilizers, the ratio between stock and consumption to rise to 24.9% 
in 2009
Fertilizer Import: import in Q1 2009 fell noticeably from Q1 2008
4. Growth of Fertilizer Production
Nitrogen Fertilizer Production: bottom hitting in Q4 2008, 9.4% growth in Q1 2009 than 
Q1 2008
Phosphate Fertilizer Production: bottom hitting in Q4 2008, 14.7% growth in Q1 2009 than 
Q1 2008
Potash Fertilizer: 11.7% growth in Q1 2009 than Q1 2008
Compound and mixed fertilizer production: minor growth in Q1 2009 over Q1 2008
5. Sales Revenue and Growth of Domestic Scaled Fertilizer Producers
Sales Revenue: sales revenue in Q1 2009 was the same as in Q1 2008
Growth of sales revenue: drastic growth of potash fertilizer in 2008 and back to normal
6. Gross Profit Rate of Fertilizer: continual decline in Q1 2009
Fertilizer Price: bottom hitting in Q1 2009, and rally expected in Q2 
7. Total Profit and Growth of Fertilizer 
8. Prospect of Fertilizer Industry
Positive growth of fertilizer consumption volume in 2009 is expected
Affluent production capacity of both nitrogen fertilizer and phosphorus fertilizer, but potash fertilizer would depend on import for a long time
 
II. Fertilizer Industrial Chain
Analysis of input and output of fertilizer
Each ton of urea consumes 0.6 ton of liquid ammonia on average
Each ton of MAP consumes 1.4 tons of sulphuric acid, 1.8 tons of phosphorus ore and 0.14 ton of liquid ammonia on average
Each ton of DAP consumes 1.5 tons of sulphuric acid, 1.8 tons of phosphorus ore and 0.24 ton of liquid ammonia on average
Supply of synthetic ammonia raw material: abundant coal supply but fast price upsurge, preferential policy on natural gas not appropriately implemented
Supply of sulphuric acid raw material: surplus of sulphuric acid production and surplus around the globe
Phosphoric acid supply: production capacity still surplus in 2009
Potassium ore supply: scarcity of potassium ore, external dependence is as high as 60%-70%
Fertilizer processing: production cost of processing companies close to raw material supply is remarkably lower than those not in raw material producing areas
Fertilizer sales link: the operational skeleton shift towards diversification and multiple operational modes from the agricultural raw material supply-sales system
Crucial factors for success of a fertilizer company are ability in obtaining low-cost energy and minerals and ability in cost control
 
III. Analysis of Fertilizer Market Competition
194 billion yuan of sales revenue of scaled nitrogen fertilizer producers in 2008, of which urea accounted for around 57%
Urea consumption structure: over 83% of urea was consumed by farming
58.3 billion yuan of sales revenue of phosphorus fertilizer in 2008
14.7 billion yuan of sales revenue of potash fertilizer in 2008
165.9 billion yuan of sales revenue of compound and mixed fertilizer in 2008
 
IV. Import & Export of Fertilizer from 2006-2009
Status of fertilizer export: fertilizer export makes up less than 10% of production, export fell sharply in Q1 2009
73% decline of urea export in Q1 2009
57% decline of concentrated superphoshpate export in Q1 2009
60% growth of DAP Export in Q1 2009
40% decline of MAP export in Q1 2009
98% decline of NPK export in Q1 2009
Status of fertilizer import: domestic demand shrank in Q1 2009, and fertilizer import on a downward trend
27% decline of potassium chloride import in Q1 2009 from Q1 2008
62% decline of potassium sulphate import in Q1 2009 from Q1 2008
Positive growth of DAP in Q1 2009 thanks to non import in Q1 2008
100% growth of NPK import in Q1 2009 than Q1 2008
 
V. Qinghai Salt Lake Potash Co., Ltd.: Domestic Leading Player in Potash Fertilizer MOP
Potash price kept at high level pursuant to scarcity
XINJIANG GUANNONG FRUITS AND ANTLERS CO., LTD.: benefited from State Investment Xinjiang Luobupo Potassium Salt Co., Ltd., and efficiency of potash fertilizer to be fully exploited in 2009
Relevant listed fertilizer companies
 
VI. Interpretation of Fertilizer Policy
The National Grain Development Plan (2008-2020) Ensures Stable Growth of Domestic Fertilizer Demand 
Comprehensive subsidy of agricultural raw material shall link up with fertilizer price in 2009
Preferential Treatment of Fertilizer Raw Material and Energy Prices
Limited Impact from Relaxation of Fertilizer Price Control on Market
Slightly Lower Customs Tariffs on Fertilizer Export from July 1st, 2009
Fertilizer Reserve Raised to 1,600 Tons during Off Season Further Released Company 
Pressure
 
Annex 1: List of Charts
Annex 2: Introduction to Fertilizer Products
Annex 3: Status of Pyrite Resource
Annex 4: Status of Phosphorus Ore Resource
Annex 5: Status of Potassium Ore Resource
Annex 6: Equilibrium of Fertilizer Supply and Demand
Annex 7: List of Top 100 Domestic Fertilizer Producers
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