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Fertilizer export duties raised again

By Xin Zhiming (China Daily)
Updated: 2008-09-02 09:39

Stockpiles of fertilizer to be sold at a Zhejiang fertilizer company. Export duties on urea and ammonia will be raised to 150 percent from 135 percent, taking effect from yesterday till the end of December.[Asianewsphoto]

China, the world's biggest grain producer, has raised export duties on fertilizer in the latest move to keep prices low to protect farmers and ensure agricultural production.

Analysts said the move would push some domestic producers to the wall by eroding their profits.

Export duties on urea and ammonia will be raised to 150 percent from 135 percent, taking effect from yesterday till the end of December, the Ministry of Finance said in a statement on its website.

The previous 100 percent tax on other fertilizer products, which were supposed to have been withdrawn by the end of this month, will be extended to Dec 31.

The government had raised export duties on fertilizers in April, raising the export tax level to 100-135 percent for the period from Apr 20 to Sept 30.

But National Development and Reform Commission statistics show that from January to June, the country exported 7.78 million tons of fertilizer, up 71 percent year-on-year. Its exports of urea, a nitrogenous plant additive, tripled to 3.78 million tons.

"International prices have risen strongly and even with the hike in the export tariff in April, exporters can still profit from the gap between domestic and international prices," said Guo Jingpu, industry analyst with Cinda Securities.

Besides, since fertilizer production requires coal and natural gas, the move is also aimed at saving energy and resources, he said.

With the April tax adjustment, China's exports of urea were priced at about 4,000 yuan per ton, about 10 percent lower than the general international prices, he said, prompting domestic producers to export more.

Domestically, the government has tried to keep fertilizer prices from rising too fast as huge price rises since last year have made farmers reluctant to grow grains.

The government-directed price is apparently lower than the international level. It is only around 1,700 yuan, which has driven some producers into the red as the cost of raw materials such as coal and gas has gone up, analysts said.

"Many producers have had no profit domestically," said Guo. "The new adjustment would make it even harder."

Guo said the current tax level is "fairly high" and that he was not sure whether it would be raised further. But some analysts said it might even be raised to 185 percent for urea.

The government will also tax exports of plant- or animal-based fertilizer, excluding guano, at 460 yuan per ton from Sept 1 to Dec 31, the Ministry of Finance said in a separate statement.