china fertilizer

7/28/2019 China Fertilizer

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Chinas Fertil izer

Industry Review and

Outlook

Zhai Jidong- COO of Spur Ventures Inc., Canada- President of Spur China, China

Chiangmai Thailand

& Brief Introduction on Chinas Economic Development& Review and Outlook on Chinas Fertilizer Industry& Chinas New Policy for Fertilizer Industry During the 11 th 5-year Plan& Impact on Chinas Fertilizer Industry and the Trend

Chinas Economic

Development

I

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Chinas Concerns Food security and

farmer income

Major issue is not growthrate but equality

Balance between economy,resource & environment

Not only China but alsoglobal sustainabledevelopment

Chinas GDP From 1978 to 20061978-2006GDP

Source: National Bureau of Statistics of China (NBSC) SPUR

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Chinas GDP Growth TrendGDP

Source: NBSC, SPUR

Chinas economy grew at 9.5 annuallyfrom 1981-2010309.5%

Source: NBSC, SPUR

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China Urban & Rural PopulationAs Percent of Total Populat ion, 1950 2030

Source: NBSC, SPUR

China: Stock Market vs. GDP GrowthGDPVS.

Source: NBSC, SPUR

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Chinas Future EconomicEnvironment and the Trend

Chinas Economic Driving Factors More private enterprise

More farmers move to cities More regional economy development

More industrial clusters

Increasing service sector Accessing global natural resources Knowledge & property right protection

Challenges for Chinas Economy Development Energyresources (oiliron orepotash) Environmental safety (atmospherewater areasoil

vegetation) Industrial safety (frequent mine accidentincreasing flinty

transportation situation)

Food security (sufficient supplygood quality green food) Welfare (politicalpopulationsocial securitySARSbird

flu)

Source: Washington Post

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The significant strategy changeswhich Chinese enterprises are facing

1. From shortage economy to over supplyeconomy (Sellers to Buyers market)

1978-1992 Power controlling market, two price systems

1993-2003 Marketing control economy

2003-Now Capability control system (Skills, Management,Capital, Capability)

2. From localization to internationalization Transnational Corporations: Enter into China,

Research China, Using China)3. From rough operation to refined management

GEs three circles strategy: Core business,Hi-tech & Service

The significant strategy changeswhich Chinese enterprises are facing

4. From OEM to self-owned property and brandoperation

5. From manpower cost to human being resourcemanagement

4. From abnormal team to normal team

5. From rule management to culturalmanagement

6. From single competition to competing andcooperation alliance

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Review and Outlook on

Chinas Fertilizer

Industry

II

Demand/Supply

Market

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Chinas FertilizerSupply/Demand(by Nutrient)

Source: NBSC,SPUR

Chinas Nitrogen Fertilizer Supply/Demand(by Nutrient)

Source: NBSC, SPUR

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Chinas Urea Supply/Demand(by Nutrient)

Source: NBSC, SPUR

Chinas Phosphate Supply/Demand(by Nutrient)

Source: NBSC, SPUR

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Chinas DAP Supply/Demand (by Products)DAP

Source: NBSC, SPUR

Chinas Potash Supply/Demand(by Nutrient)

Source: NBSC, SPUR

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Chinas Compound Fertilizers Supply/Demand(by Product)

Source: NBSC, SPUR

Domestic Supply

Production

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Chinas Ferti lizers ProductionTrend

(in 100% Nutrient)

Source: NBSC, SPUR

Chinas Nitrogen Fertilizer ProductionOutlook

Source: NBSC, SPUR

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Chinas Phosphate FertilizersProduction Trend (100% P2O5)

Source: NBSC, SPUR

Chinas P2O5 Demand and ProductionOutlook

(in 0,000mt P2O5)

Source: NBSC, SPUR

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Imports

Chinas Fertilizers Import Trends(in million mtproducts)

Source: NBSC, SPUR

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Chinas New Policy for

Fertilizer Industry

11th 5-year Plan

III

The Key Points of the NewIndustrial Policy

Secure supply for farmers. Set up rules and regulations to keepfertilizer industry value chain normal, stable and healthy.

Promote Industry Centralization and Competitiveness. Encourageprivate & foreign investor as well as international cooperation for Chinas fertilizer industrialstructure and consolidation.

Open fertilizers market. Encourage services for agriculture andfarmers and abolish all subsidy policies and directly pay subsidies to

farmers

Control market access and fertilizer projects. Projects under US$ 100 millionshould be approved by provincial DRC. Projects over US$ 100 million must get the approval from SDRC;

NH3 projects must be above 200,000 tonnes annual capacityPA projects must be above 100,000tonnes P2O5 per annum.

Improve standards of environmental protection, energy saving,production technology and contaminations releases

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Significant Effects on the FertilizersIndustry in China

I. Removing VAT vacation, the average price of NPK willincrease 6%

II. Removing fertilizers transportation subsidies will

change the fertilizers market distribution structureIII. Removing coal, natural gas and electricity subsidies the

medium and small fertilizers producers will be washed

outIV. To smoothly carry out direct payment to the farmers of

the subsidies is the key issue to guarantee the success ofthe new policy.

Impact on Chinas

Fertilizer Industry andthe Trend

IV

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1The production capacity will beexpanded and centralized rapidly

2Fertilizer Consumption willdecline

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3Environment requirement higherand higher

4The Preferential policies will begradually removed

Tax VacationPreferential electricity pricePreferential transportation expenseFertilizer subsidy

Policy applied equally to all industryDirect subsidy to farmers

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5 The investment decision systemwill gradually apply to the market

Today China is changing from a planned to amarket system

Investment decisions are mainly made by the

government

unavoidable for the local protectionism and

officials being after political achievements.

As Chinas economic growth cont inues using

the concept of sc ientific development, the

investment decisions and the resource allocations

will gradually become more market or iented.

6The Challenge: End Of CostCompetition

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Thank You!

Thank You!

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