Non-ferrous enterprises trapped in sulfuric acid sales face the explosion of warehouse fertilizers export tariffs
Due to the inability of fertilizer companies to export sulfuric acid, five major non-ferrous metal enterprises in China recently sent a letter to the Ministry of Commerce, urging a reduction in export tariffs on phosphate and other fertilizers. This move aims to address the growing surplus of sulfuric acid, which is causing significant challenges for the non-ferrous metal industry. The excess supply is nearing a crisis point, with storage facilities overflowing and production at risk of being halted.
The companies involved include Zhuzhou Smelter Group Co., Ltd., Zhongjin Lingnan Nonferrous Metals Co., Ltd., Shuikoushan Mining Bureau, Henan Yuguang Gold & Lead Co., Ltd., and Anyang Yubei Gold & Lead Nonferrous Metals Co., Ltd. These firms primarily produce lead and zinc, with industrial sulfuric acid as a by-product. However, due to the financial crisis, sales of sulfuric acid have been extremely difficult since last year, leading to large stockpiles that are becoming a serious problem.
One industry insider noted that many non-ferrous metal companies now face the dilemma of having to sell sulfuric acid at zero cost because they cannot store or dispose of it. With storage tanks nearly full, the smelting industry is under threat of shutdown.
According to industry experts, approximately 70% of domestic sulfuric acid is used in the production of phosphorus-based fertilizers. The performance of the phosphate fertilizer sector directly affects sulfuric acid prices. According to data from the Phosphate Fertilizer Industry Association, current domestic production capacity for DAP (Diammonium Phosphate) stands at 15 million tons, but domestic demand is less than 5.5 million tons. Similarly, monoammonium phosphate production is around 16 million tons, yet demand is below 6.5 million tons. As a result, many phosphate and compound fertilizer companies are sitting on large inventories.
To sustain their operations, these companies rely heavily on exports. However, the Chinese government imposed special export tariffs on fertilizers starting April 1, 2008, with a 35% export tariff and a 100% special tariff. Later, during the low season (June, July, November, and December 2009), the export tariff was reduced to 35%, while the special tariff was set at 10%. During peak seasons (February, March, April, May, August, September, and October 2009), the export tariff remained at 35%, but the special tariff increased to 75%. These measures severely restricted fertilizer exports, leading to a surplus in the domestic market.
A representative from the China Nonferrous Metals Industry Association pointed out that the inability of the fertilizer industry to export has caused a dramatic drop in sulfuric acid prices—from 2,000 RMB per ton to just 100 RMB per ton—resulting in sharp declines in corporate profits. Moreover, the accumulation of unsold sulfuric acid threatens the normal operations of lead and zinc smelters.
Qi Tong, a member of the China Sulfuric Acid Industry Association, stated that the current sulfuric acid market is oversupplied, and prices are unlikely to rise. Production this year is expected to reach about 56 million tons. "The market is in chaos, with fierce competition for raw materials and markets, which is seriously affecting the development of the industry," he said.
Industry sources in South China and South Korea noted that while fertilizer exports may not directly impact metal smelting, they are closely linked. If the government can reduce tariffs during off-seasons, it would indirectly support the survival of non-ferrous metal companies like those in the lead and zinc sectors, helping them overcome current difficulties.
It is suggested that the government should focus on domestic consumption, ensuring that farmers' needs are met before allowing surplus fertilizers to be exported. Alternatively, quotas could be used to control export volumes, and export tariffs could be removed to alleviate pressure on the industry.
Zhang Yongzhi, vice chairman of the China Phosphate Fertilizer Industry Association, also recommended eliminating the difference in export tariffs on phosphate fertilizers starting this May and implementing zero tariffs. He further proposed that the government provide appropriate financial support to high-cost ammonium phosphate producers to help promote structural adjustments in the phosphate fertilizer industry.
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