Natural gas shortages have significantly impacted China's fertilizer industry, particularly for large-scale chemical companies that rely on natural gas as their primary raw material. This year, many coal-based fertilizer producers have faced challenges due to poor winter storage and rising inventory levels, while gas-based enterprises are struggling with severe raw material shortages, leading to production halts. These companies produce fertilizers that are highly demanded by farmers, but without a steady supply of natural gas, even the best products cannot be manufactured. The persistent lack of long-term gas supply has become a major obstacle for gas-head fertilizer companies in China.
Henan Province, a key agricultural region, is home to Zhongyuan Dahua Group, the province’s only large-scale chemical fertilizer company. Established with advanced natural gas-based technology, the company has continuously innovated and maintains domestic-level production processes. Its Zhongyuan Chemical Fertilizer was recognized as a quality-exempt product nationwide and is a well-known brand in Henan. However, natural gas supply issues have plagued the company, especially since late 2003. According to a deputy general manager, the company requires 1.2 million cubic meters of gas daily for normal operations, but current supplies fall below 600,000 cubic meters per day. As a result, the compound fertilizer plant has been partially shut down, and the urea system is operating at only 50% capacity. Despite this, the Henan Provincial Development and Reform Commission has only managed to secure limited coordination with the Zhongyuan Oilfield.
In 2005, the company was unable to operate at full capacity. From January to March, daily gas supply averaged between 600,000 and 700,000 cubic meters, increasing slightly in April to July to around 1 million cubic meters, then dropping again in August to October to about 700,000–800,000 cubic meters. By November, it remained above 600,000, but fell below that in December. Despite strong management and product quality, the company produced only 60,000 tons of synthetic ammonia, 100,000 tons of urea, 150,000 tons of compound fertilizer, and 10,000 tons of melamine this year, resulting in an estimated economic loss of 100 million yuan.
Other similar companies, such as Hebei Qizhou Dahua and Shaanxi Dagang Gas, also face significant gas supply constraints. For instance, Zhongyuan Oilfield completely cut off gas supply in mid-November, forcing the company to operate at 50–60% capacity, relying mainly on Shaanxi gas. Even though its iron lion urea is a nationally inspected exempt product, production and supply have both declined sharply this year.
Guizhou Chitianhua Co., Ltd. planned to receive 430 million cubic meters of gas annually, but this is still short by over 100 million cubic meters compared to the 580 million needed for full production.
To address these challenges, gas-based fertilizer companies are exploring alternative raw materials. Zhongyuan Dahua is investing in coal chemical projects to achieve 30% self-sufficiency in gas for fertilizer production. However, the project is not expected to yield results until 2007, and it will take time before any real impact is seen.
Gas-based companies also report that the more natural gas they are allocated, the higher the cost, which increases production expenses. Yet, adjusting urea prices next year remains difficult. Despite this, companies prioritize stable gas supply over price concerns.
When asked about future gas supply prospects, a representative from Suihua stated, “There may be no children. Last year on December 28, we still had raw materials, but this year on January 1, there will be no gas.†Zhongyuan Dahua’s management expressed frustration, noting that they submitted over 20 reports to national and provincial authorities, and meetings were held, yet the situation remains unresolved.
Reporters observed that the ongoing natural gas shortage has not only affected production costs but also caused serious underutilization of large-scale fertilizer equipment across the country. This has led to a sharp decline in high-quality fertilizer output, directly impacting spring planting and other critical agricultural seasons next year. The losses from reduced production far exceed the damage caused by gas price fluctuations.
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