Fertilizer offers will face full cancellation?

Before the Spring Festival, "Yang Gui Biao" and "Cow Devil" have not gone far. After the Spring Festival, the price hikes in many fields have sprung up one after another. On February 24th, the domestic oil came in a “rising trend” in the deceleration of global oil prices; on February 17, the Ministry of Railways, which was blown “serious losses last year,” raised the freight by 1.5 cents per ton-kilometer, from February From the 20th onwards, it has been enjoying preferential fertilizer transportation, and the freight rate rose by as much as 18.13%.

After the document was published, although the industry had a "considerable impact on the terminal market or the market outlook," there was a growing number of arguments concerning the "concession of chemical fertilizers will be gradually eliminated." In fact, in recent years, the nation’s increase in the price of electricity and natural gas for fertilizer companies has put pressure on the fertilizer companies that have already had excess production capacity. This unprecedented increase in freight rates will undoubtedly make it worry whether the country will accelerate the “complete cancellation”. Fertilizer industry offers to make it completely marketable." And within the tens of thousands of fertilizer companies that have been specially treated, the issue of whether or not to cancel the concessions has been debated for a long time.

Preferential policies bring injustice?

Recently, Zhou Yixin, a representative of the scientific and technological circles of the Hubei Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC), proposed a case to the “**” and pointed out that the 20 fertilizer companies in Suizhou that should have enjoyed preferential policies for the country’s electricity prices had been enjoyed by only one company’s workshop. In this regard, Zhou Yixin called for preferential tariffs for small and medium-sized fertilizer companies to be implemented, which also exposed the unfair side of preferential policies.

The situation of ungrounded gas also occurred in Guangdong Yunfu* Tieji Group Chemical Plant. The company produced 200,000 tons of phosphate fertilizer and high-efficiency rare earth phosphate fertilizer and organic phosphate fertilizer, according to the National Development and Reform Commission's General Office on the price of small and medium-sized chemical fertilizer production. The "Replied to the letter" and "Notice on Further Regulating the Price of Electricity for Fertilizer Production" stipulates that the annual production capacity of a single series of synthetic ammonia, phosphate fertilizer, potash fertilizer, and compound fertilizer can be 300,000 tons or less (excluding 300,000 tons). Enjoy discounts. However, its director Zeng Qiongwen revealed that the plant has been generating electricity on its own, and in addition to enjoying tax incentives, it has rarely obtained the remaining benefits.

In fact, the unfairness caused by preferential policies is far more than simply enjoying the benefits. Generally speaking, during the peak period of fertilizer demand, the transportation capacity will be even tighter. Whoever can smoothly apply for wagon shipments will be able to earn more profits. However, under the “concessional” tariff of fertilizer No. 2 that is lower than Other cargo transportation prices, countless fertilizer companies are striving for limited capacity resources, and some unconventional means have become necessary.

“Sometimes it takes only one month to apply for the wagon.” The marketing director of Shanxi Changxin Bio-Agricultural Technology Co., Ltd. is difficult to describe the urgency of waiting for the market to wait for delivery. However, he knows that in order to get an application as soon as possible in the industry, it is sometimes necessary to rely on certain public relations. “The accumulated costs are much higher than the benefits that companies can enjoy.” In his opinion, such unfair and vicious competition must increase. Implicitly, it is better to consider canceling the preferential treatment and avoid increasing the unnecessary cost and transferring it to the terminal.

In addition, as for the tariff adjustment, Li Hui, vice president of marketing for Sumitomo Fertilizer (China) Enterprise Group, is also worried that due to the fact that some companies with large production volumes will often sell across provinces, the corresponding costs will inevitably increase, while other production-based sales Companies can rely on Qiyun to achieve sales. “Companies that do not increase their costs may initiate competition through a sales campaign.”

The timing of policy cancellation is ripe?

Some people have seen the negative effects of preferential policies. Some people also firmly believe that various preferential policies must be retained. Fertilizers are related to agricultural products, which in turn affects the stability of national food security.

“Fertilizer preferential policies must be retained, and even should be expanded.” Chen Jianqiang, deputy general manager of Fujian Zhongnong Agricultural Production Co., Ltd. analyzed that the current fertilizer market is fiercely competitive and has become more market-oriented. “If you cancel the preferential treatment, fertilizer prices may increase by 1/ 3."

In most of the voices that denied the cancellation of preferential treatment, the increase in fertilizer terminal prices became the most concentrated opposition reason. "The cost and profits will increase, and the concessions will eventually be reflected in farmers." Mao Xin, sales director of Shanghai Lianye Agricultural Technology Co., Ltd., also believes.

However, these do not seem to be established in Li Hui's view, because in the context of fertilizer prices regulated by the supply and demand market, policy preferences on production costs cannot be explicitly or directly reflected in farmers’ terminal purchase prices. “Farmers have not received real benefits. ."

“It is time to cancel the preferential or subsidy.” Li Hui bluntly stated that many of the policies that the fertilizer industry enjoys today are based on the state’s efforts to encourage fertilizer production and ensure production needs. But now, domestic fertilizer production has long been out of “supply,” and it is time to let it go completely to market. “Only if fertilizer prices are completely market-oriented, can fertilizer companies be liberated and can they be truly powerful.”

Li Hui's remarks are highly consistent with those of Zhuo Chuang Consulting. The analysis points out that at present, China's fertilizer industry has a serious excess of potash production capacity, and the fact that sufficient supply and low prices throughout the year makes it possible to implement preferential policies to ensure the production of chemical fertilizers and stabilize prices. Basic loss of practical significance.

Regarding the remark that the cancellation of the concession will bring cost pressures to farmers, Li Hui believes that “these preferential policies can be used directly on farmers” to produce practical results. Although he does not deny that the cancellation of preferential treatment for producers may lead to a certain increase in prices, "but the rate will not be large, and it is entirely within the scope of farmers' tolerance of price fluctuations."

Complete cancellation will become a trend?

The controversy is ultimately a “war of words” of all opinions, and many industry analysts have seen the trend of “full cancellation of preferential policies” from the many favorable changes in the fertilizer and electricity fields.

In April 2010, Hunan Province issued an "Urgent Notice on Using Price Leverage to Protect Power Supply." This article clearly classifies the price of electricity, cancels the electricity concessions for small and medium-sized fertilizer companies, and implements them according to the corresponding ordinary industrial and large industrial electricity prices. The increase in expenditures for some small and medium-sized chemical fertilizer companies sold in the province will be subsidized by the province according to the price change of the fertilizer market. The introduction of this news became the beginning of the industry's concern that the "promotion will be gradually canceled."

According to an internal survey conducted by a consulting agency, taking some fertilizer companies in Shandong as an example, the price of outsourced electricity in January 2012 has reached 0.51 yuan/kWh, which is less than the electricity consumption of 0.5469 yuan/kWh. In April 2011 this price was only 0.395-0.398 yuan/degree.

“The gradual elimination of various preferential policies will be the trend of the times.” In the eyes of Ye Xuedong, director of the China Phosphate Fertilizer Industry Association, the increase in electricity prices, natural gas prices, and the recent increase in freight rates in 2012 are all positive signals for the fertilizer market. However, he also added that due to the special nature of chemical fertilizers affecting food, it is difficult to realize full marketization in the short term.

Most people agree that chemical fertilizers will surely embark on the “zero-preferred” judgment in the future. It also comes from the “Program for Reforming and Perfecting the Fertilizer Price Control Mechanism (Draft)” promulgated by the National Development and Reform Commission in mid-July 2005. The draft clearly states that Adhere to the orientation of market-oriented reforms, fully liberalize the price of chemical fertilizers, and gradually eliminate the country's preferential price policy for chemical fertilizer production enterprises.

Zhao Lei, a senior analyst at the British Goods Research Institute, revealed that at present the national authorities have proposed a “three-step” plan for the adjustment of the fertilizer industry’s preferential policies. The first step is to combine the adjustment of rail freight prices and natural gas prices, and eventually realize the plan, Unconventional natural gas prices are merged; the second step is to cancel the electricity price and railway freight rate concessions; the third step is to cancel the VAT concessions. “These measures are being implemented steadily.”

Cancellations involve over one billion yuan

In the eyes of many laymen, the cost increase of 15 yuan per kilometer of fertilizer tonnage after this freight rate adjustment is a small amount, but landing in a production company may result in a cost increase of over one million yuan.

Liu Fan, deputy general manager of Jiyuan City Toyota Fertilizer Co., Ltd., used a medium-sized phosphate and compound fertilizer company located in the Central Plains in an article entitled “Discussion on the Orientation of China's Fertilizer Industry's Preferential Policy Adjustments” (annual sales of ammonium phosphate and compound fertilizer were 19, 000 tons. In order to calculate, after eliminating the railway tariff concessions and preferential railway construction, the transportation costs of raw materials and finished products will increase by approximately RMB 6,826,600 annually. If all the benefits of chemical fertilizers are completely eliminated, the annual cost of the company will increase by 36,442,600 yuan, which is almost equal to the annual profit before cancellation.

Concessions can still have a tens of millions of impacts for a company. The state's concessions for the fertilizer industry are undoubtedly a much larger number.

According to the statistics, a number of domestic agencies have issued various accounting results for fertilizers. For example, the Petroleum Planning Institute has calculated that the concession amount is about RMB 13 billion to 15 billion. This figure has also become the consensus of China for many years. However, in 2005, Zhang Weifeng, associate professor of the College of Resources and Environment of China Agricultural University and others, calculated that the total amount of preferential credit was 40.31 billion yuan. Among them, the transportation discount was 8.8 billion yuan, natural gas was 396,000 yuan, electricity was 11.55 billion yuan, and VAT was 16 billion yuan.