As the the most important type of agricultural input, fertilizers account for 50% of total expenditure in agricultural production, with chemical fertilizers being used in 55% of food production. However, high fertilization levels have led to low utilization ratios.
In China, the utilization ratios of nitrogen fertilizers, potash fertilizers and phosphate fertilizers are only between 30% to 50%, 35% to 50%, and 10% to 25%, respectively. The low utilization ratio of nitrogen fertilizers in China is primarily due to their volatility, nitrification and denitrification. In other countries, the utilization ratio of nitrogen fertilizers can be 50% to 55%. After a crop is fertilized many times, fertilizer residue collect around the rhizosphere, which undermines root cells, leads to salt damage, destroys soil structure, reduces crop yield and can even result in dead plants. Fertilizers also contaminate surface water and ground water, resulting in severe environmental problems.
The solution to this issue is the use of slow and controlled-release fertilizers, which can mitigate soil hardening caused by the over-fertilization of upland crops. Such fertilizers can also coordinate the supply of nutrients to the crop, effectively slowing the rate of nutrient release. Slow and controlled-release fertilizers can deliver significantly improved utilization ratios, reducing the number of required fertilizer applications and the overall need for both pesticides and fertilizers.
Global slow and controlled-release fertilizer market witnesses rapid growth, with China becoming the world's largest market
According to a report by the International Fertilizer Association (IFA) in 2016, the global fertilizer market registered a value of U$155.6 billion, with China, the world’s largest fertilizer application market, accounting for 37%. As forecasted by the report, from 2018 to 2019, global fertilizer demand will see a modest rise, and China's consumption of nitrogen fertilizers and phosphate fertilizers will hit an inflection point. The report also predicts that the global demand for fertilizers will grow by 0.8% year-on-year to 189 metric tons while the global controlled-release fertilizer market will continue its rapid growth over the next few years.
In 2017, the global controlled-release fertilizer market was valued at $1.56 billion. This market is now expected to grow at a compound annual growth rate (CAGR) of 6.29% over the next 5 years to between $2.11 and $3.9 billion by the end of 2024, according to the latest report by Markets and Markets, a global think-tank. The Asia-Pacific region, including China, will remain the largest regional market for such fertilizers, accounting for over two-thirds of global demand, and is expected to be the most lucrative region across the entire forecast period. In terms of consumption, China is the major consumer of controlled-release fertilizers in the region, accounting for 46% of overall use, followed by Japan and ASEAN countries.
Controlled-release fertilizers fall into the categories of resin-coated azophoska, resin-coated urea, sulfur-coated urea and coated microelements. The demand for sulfur-coated urea was 1.4 million tons in 2015, and this figure is projected to reach 2.5 million tons by 2024.
Controlled-release fertilizers are applied mainly to grain crops, which represent a significant part of the traditional foods of emerging Asia-Pacific economies. Other factor, such as a growing population, policy support and increased yields through the use of fertilizers will increase demand for controlled-release fertilizers.
Market for new fertilizers, especially slow and controlled-release fertilizers, rapidly growing in China
According to recent data, China’s new fertilizer industry has been growing rapidly over the past decade. According to incomplete statistics, there are currently over 2,000 companies that produce new fertilizers in China, representing 30% of total fertilizer production and valued at more than RMB50 billion, delivering an annual output value in excess of RMB16 billion. New fertilizers are emerging as the foundation of China's fertilizer market.
By category, new fertilizers in China fall primarily into five classes, which are functional fertilizers, slow and controlled-release fertilizers, commercial organic fertilizers, microbial fertilizers and water-soluble fertilizers. In 2017, the total output of new fertilizers in China was 37 to 41 metric tons, applied to an area of around 1 billion mu. Specifically, the output of slow and controlled-release fertilizers stood at 1 to 12 million tons per year, with most being compound fertilizers combined with slow and controlled-release fertilizers. The output of pure slow and controlled-release fertilizers was about 3 to 3.6 million tons per year, accounting for 27% of total output.
Being environmentally-friendly, efficient, time-saving and labor-saving, slow and controlled-release fertilizers have developed rapidly over a decade and have become major products of China's fertilizer industry. In the future, they will enable China to freeze fertilizer growth and help ensure national food security and agricultural sustainability.
According to the latest statistics from the Office of China National Committee Aging, there are currently 240 million people aged above 60 in China, accounting for 17.3% of the total population, meaning that on average, close to four workers are supporting one elderly person. This also indicates the China’s population is becoming increasingly old. By 2020, the number of people aged over 60 is expected to be roughly 255 million. An ageing population also affects the labor force more in rural areas.
Slow-acting fertilizers, when applied to the rhizosphere, can deliver better utilization ratios. At present, conventional fertilizers still rely on extensive surface broadcasting, posing heavy burdens on an ageing labor force, especially when applied in mountainous areas. New fertilizers have drastically reduced labor costs without compromising yields, providing farmers with increased incomes. Therefore, China’s new fertilizer market has considerable potential.
According to a conservative estimate, the CAGR of slow and controlled-release fertilizers will stand at 10% to 15% over the next decade. By 2025, China will also produce 7.55 to 11.26 million tons of slow and controlled-release fertilizers, delivering an output value of between RMB21.1 million and RMB31.5 billion.
The fertilizer industry urgently needs to upgrade many products, as traditional nitrogen fertilizers and phosphate fertilizers face serious overcapacity and underperform. Slow and controlled-release fertilizers, by virtue of their technical soundness and potential, represent a significant new approach compared to traditional fertilizers, such as nitrogen fertilizers and phosphate fertilizers. Today, many companies that produce nitrogen fertilizers have established their own production lines for slow and controlled-release fertilizers. In recent years, slow and controlled-release fertilizer producers, represented by Kingenta, have been proactive in promoting production cooperation with upstream nitrogen fertilizer and phosphate fertilizer producers, by sharing technologies, brands, channels and services, which has advanced the development of the slow and controlled-release fertilizer industry. We are confident that China's slow and controlled-release fertilizer market is maturing and will become a major market for both domestic and overseas products.