In early January 2005, the National Development and Reform Commission and the Ministry of Finance introduced the "Administrative Measures for Commercial Reserves during the Off-Season Fertilizer Period." At the time, fertilizer companies were eager to participate in the temporary reserve program, with both manufacturers and distributors scrambling to get involved. However, only large state-owned enterprises were eligible for the light-storage bids, which caused frustration among private firms and SMEs. But now, the situation has changed. Recently, reporters found that despite unchanged policies and conditions, the rush to bid for off-season reserves has disappeared. Why? One key reason is the rising market prices, which have made it less attractive for companies to store fertilizers. Since August, international fertilizer prices have surged, leading to a steady increase in domestic prices. Urea prices have risen by about 100 yuan per ton compared to July, while DAP and other high-concentration fertilizers have also seen significant price hikes. According to the national schedule, companies must complete their procurement and storage between October and March. During this period, urea export tariffs are low, and exports are booming, which further pushes up domestic prices. This makes it difficult for reserve companies to buy at favorable prices. With higher export tariffs expected next year, some companies may be forced to purchase before the deadline, but this could lead to a spike in prices, increasing costs and risks. “If we have to buy 8 million tons in a short time, yet domestic prices don’t rise, why would we do it? Will we end up losing money?” asked one executive. Another factor is overcapacity. China’s fertilizer production, especially nitrogen and phosphate, is now oversupplied. With the decline in demand due to improved soil testing and fertilizer application techniques, as well as reduced arable land, the market is flooded. Companies are hesitant to store fertilizers because they fear prices will drop after they purchase. Some even prefer to sell directly rather than store. For example, Shaanxi Luohe Coal Chemical Group, which stored 150,000 tons in the previous season, only managed to store 50,000 tons this year, partly due to lack of interest. Additionally, the government’s preferential policies have become less appealing. While there are subsidies for interest loans, companies still bear all other costs, including warehousing, labor, and market fluctuations. With rising operational costs and limited support, many companies feel it’s no longer worth the risk. As one manager put it, “We didn’t participate in the bidding this year because the risks are too high, and the benefits are not enough.”

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