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 submitted a letter to the Ministry of Commerce, urging a reduction in export tariffs on phosphate and other fertilizers. This is aimed at addressing the growing surplus of sulfuric acid, which is now causing severe operational challenges for non-ferrous metal producers. The situation has reached a critical point, with storage facilities overflowing and production lines at risk of shutdown.
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 products, with industrial sulfuric acid as a by-product. However, due to the global financial crisis, the demand for sulfuric acid has dropped sharply, leading to massive inventory buildup.
One industry insider explained, "Currently, non-ferrous metal companies are sitting on huge stocks of sulfuric acid. Storage tanks are full, and there's no space to store more. Without a solution, smelting operations could be forced to halt, and many companies are selling at zero cost just to clear inventory."
According to industry experts, about 70% of domestic sulfuric acid is used in the production of phosphorus-based fertilizers. The performance of the fertilizer sector directly affects sulfuric acid prices. Data from the Phosphate Fertilizer Industry Association shows that current production capacity for DAP (Diammonium Phosphate) is 15 million tons, but domestic demand is only around 5.5 million tons. Similarly, monoammonium phosphate production stands at 16 million tons, yet demand is less than 6.5 million tons. This imbalance has led to significant stockpiles, forcing fertilizer companies to rely on exports to sustain their operations.
However, export restrictions have made this impossible. As of April 1, 2008, a special export tariff of 35% was imposed, with an additional 100% special tariff. Later, during off-season months (June, July, November, and December 2009), the export tariff was reduced to 35%, with a 10% special tariff. 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 policies effectively blocked fertilizer exports, leading to a severe oversupply in the domestic market.
A representative from the China Nonferrous Metals Industry Association noted that the inability of the fertilizer industry to export has caused a dramatic drop in sulfuric acid prices, from around RMB 2,000 per ton to just RMB 100 per ton. This has severely impacted corporate profits. Moreover, the slow-moving sulfuric acid is threatening the normal operations of lead and zinc smelters.
Qi Tong, from the China Sulfuric Acid Industry Association, stated that the current sulfuric acid market is flooded, with production reaching about 56 million tons this year. He warned that the ongoing price war and competition for raw materials and markets are seriously harming the industry’s long-term development.
Industry sources in South China and South Korea mentioned that while fertilizer exports may not directly affect metal smelting, they are closely linked. If the government can reduce tariffs during off-seasons, it would indirectly support non-ferrous metal companies, helping them navigate through tough times. They suggested that the government should focus on domestic consumption, and if the fertilizer industry can meet farmers’ needs, it should consider removing export tariffs or using quotas to control exports.
Zhang Yongzhi, vice chairman of the China Phosphate Fertilizer Industry Association, also proposed eliminating the export differential for phosphate fertilizers starting this May and implementing zero tariffs. He further recommended that the government provide financial support to high-cost ammonium phosphate producers to help the industry adjust its structure and improve efficiency.
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