Be all-sided, where does the gas fertilizer go?

The article discusses the challenges faced by large-scale gas-to-liquid fertilizer companies in Southwest China, a key region for gas-based fertilizer production. In early 2014, several of these companies released their quarterly performance forecasts, revealing that the industry is under significant pressure and struggling to maintain stability. The situation reflects broader issues within the national gas fertilizer sector. Many major gas fertilizer producers, including Yuntianhua, Chitianhua, Lutianhua, Sichuan Tianhua, Sichuan Chemicals, Sichuan Meifeng, Jianfeng Chemical, and foreign firms like Wuyuan Chemical, reported poor performance during the first quarter. Most suffered heavy losses due to natural gas shortages and rising prices, as well as weak market demand and falling urea prices. Over the years, the imbalance between natural gas supply and demand has worsened. The implementation of the “National Ten Measures” for air quality control last year led to widespread coal-to-gas conversions, exacerbating the shortage. In 2013, China’s natural gas consumption reached 169.2 billion cubic meters, with an import dependency of 31.6%. Despite increased production, the gap between supply and demand still stood at 22 billion cubic meters. Under policies prioritizing industrial and residential gas use, fertilizer companies found their access to natural gas restricted. Even though they are essential for agriculture, their gas needs were not given special attention. As a result, many plants had to reduce operations or shut down. For example, Sichuan Tianhua was forced to halt production from December 2013 to March 2014, significantly lowering its urea output. Yuntianhua, located in Yunnan, could only operate at about 70% capacity due to gas shortages. Its plant requires 500 million cubic meters of gas annually, but only 180 million is allocated for fertilizer production. The rest is used for higher-cost industrial applications, which still left the company unable to run at full capacity. Rising gas prices further strained the industry. From July 2013, non-residential gas prices were increased, adding 150–200 yuan per ton to urea production costs. Meanwhile, urea prices continued to fall, dropping from 1,700 yuan/ton in January to 1,400 yuan/ton by the end of the year, despite peak agricultural season. This price slump was driven by overcapacity in the urea industry. Production capacity grew rapidly, especially after the "Eleventh Five-Year Plan," while demand did not keep pace. By 2013, the profit margin for urea was just 2.31%, and projections suggested even greater surpluses in the coming years. By 2015, the industry could produce 95 million tons of urea, far exceeding domestic demand of 62.3 million tons, resulting in a massive surplus if exports remain at current levels. Faced with these challenges, gas-to-fertilizer companies have begun exploring new strategies. Some are shifting from natural gas to coal as a raw material, while others are diversifying their product lines to increase value. For example, Chitianhua transitioned to coal-based urea in Guizhou, reducing its reliance on gas. Similarly, Yuntianhua invested in coal-to-gas projects in Inner Mongolia, although delays and high costs slowed progress. Sichuan Meifeng focused on improving product quality, launching high-value urea for industrial use. Jianfeng Chemical became the first in China to use shale gas for fertilizer production, leveraging local resources to ease gas shortages. However, the transition is not without difficulties. Projects like coal-to-gas require long construction periods and substantial investment—often exceeding 5 billion yuan. Additionally, market conditions may change before projects are completed, leading to further losses. Shale gas prices also pose a challenge, as they remain relatively high compared to traditional sources. Industry experts suggest that the government should take action to help the sector. Recommendations include phasing out outdated facilities, encouraging technological upgrades, supporting strategic transformations, and preserving key enterprises. These steps aim to address overcapacity, improve efficiency, and ensure long-term sustainability. As the industry continues to adapt, the path forward remains uncertain. But with policy support and innovation, there is hope for a more stable and profitable future.

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