China's urea is saturated

In these two years, urea is very popular in the market, and all companies that produce urea have good profits. As a result, some companies are eager to expand and build new urea plants. Some use natural gas as raw materials and some use coal. The scale is not small, and investment is certainly not small. Here, I would like to give these companies a reminder: China's urea is saturated, if there is no particular advantage, investment in urea should be cautious.
The annual consumption of urea in China is about 30 million tons. Even if it is predicted that there will be a certain increase in the next 10 years, it will probably not exceed 35 million tons. The total capacity of the existing installations is not far from this amount. If we add 800,000 tons of Hainan, which is being built, to about 2 million tons of Shanxi, our production capacity will be surplus in the next 10 years.
Let us analyze the current urea market. It should be noted that although urea sales have been smooth and prices have been higher in the past two years, the production and sales situation is not insufficient for production, but production is greater than sales, and about 1 million tons of urea are exported every year. Another important factor contributing to this urea sales situation is that some domestic companies, especially some of the original oil giants, have not joined the group. All these companies are changing coal to raw materials and will resume production in succession. By then, China's urea production capacity will be greater, and sales pressure will be greater.
Our urea can be exported, but it must be based on the low cost of urea in our country and low transportation costs. At present, China's export of urea is not yet fully equipped with the above advantages. Even new production devices built in the future will still not have such advantages. At present, even in Southeast Asia, the landed cost of China's export of urea is not high, and there is still no price competitiveness compared with urea in Russia and the Middle East. The reason why China's enterprises export urea can benefit from China's export tax rebate policy, but this policy advantage is gradually disappearing. Moreover, the main targets of China's exports, such as Vietnam and other countries, are preparing to build a large-scale chemical fertilizer plant. In 2005, there will be a batch of production. By then, we will lose these export markets and the difficulty of exporting products will increase. Therefore, we do not have enough reason to expect that our country's urea export market will grow significantly in a few years.
If you look at new and individual expansion companies, you may have some advantages. You can squeeze out some companies in domestic competition and win the development space for yourself. However, this kind of competition is rather cruel and it is not worth promoting. Moreover, from the history of the nitrogen fertilizer industry in China for the past 20 years, this kind of competition is also long-term, and it is very likely that the dominant companies will also suffer serious losses in the competition.
Finally, we must realize that the urea market is now a good year and companies have profits. But there will be bad years. If at that time, our country’s urea production capacity will be seriously excessive and the export market will be small, it will be a terrible disaster.

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