Thursday, January 01, 2009

China to ease price control on fertilizer

China is planning to speed up reform of its fertilizer pricing mechanism by letting market forces determine prices at an appropriate time, while scrapping temporary price controls imposed on fertilizers, the State Council, or China's Cabinet, announced at a meeting on Dec 24.

But the government will still retain a "certain" degree of price controls on potash, of which China is a major importer, the State Council said.

The government will allow all types of investors to invest in the fertilizer circulation sector and will also strengthen the export management system and fertilizer reserve mechanism.

Fertilizer prices have long been under government regulation, which set ceilings on factory prices, aiming to ensure supply and lighten burdens on farmers.

"Price intervening is unnecessary under the current situation," Li Guoxiang, a researcher at the Chinese Academy of Social Science, told China Business News.

The global financial crisis has dragged down prices of some major raw materials used in the fertilizer industry, making factory prices at some producers already lower than government-set prices.

The price of American diammonium phosphate has shrunk 40 percent from the beginning of 2008. Sulphuric acid prices in November dropped 24.1 percent from October, and 33 percent from the same month in 2007, according to the Ministry of Commerce.

"Fertilizer producers may not benefit from the policy in the short run," said Li. "But it would help for the price leverage to take effect."

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