China’s compound fertilizer industry underwent a transformative period in the first half of 2025, characterized by substantial export growth and cost-driven market dynamics. This analysis dissects the 343% surge in exports, examining price trends, production patterns, and trade shifts, as well as the underlying drivers and implications for the second half of the year.

I. Market Overview: Price Trends and Seasonal Dynamics

The 45% sulfur-based balanced fertilizer, a key benchmark, exhibited distinct price patterns.

Average Price: RMB 2,881/ton, marking a 1.12% year-over-year increase and fluctuating within a range of RMB 2,720–2,993/ton.

Q1 stability: Post-holiday inventory buildup and weak demand suppressed price movement.

Q2 surge: Spring planting demand and rising raw material costs (e.g., sulfur and potash) drove prices higher.

Late Q2 correction: Regional oversupply, policy interventions to stabilize prices, and shifting export demand triggered a price adjustment.

II. Production Landscape: Growth vs. Structural Shifts

Despite the expansion of output, the production sector received mixed signals.

• Total output: 31.16 million tons (a 4.7% year-over-year increase).
• Capacity utilization: 34.49% (a decline of 0.39 percentage points year over year), reflecting underutilized capacity.
• Key observations:

1. 1. Spring production peaks: Utilization rates surged to 42–55% during the planting season.
   2. Sector Polarization: Medium-sized enterprises benefited from economies of scale and drove growth. Meanwhile, smaller companies struggled with cost pressures and limited access to export markets.
   3. New Capacity: Despite utilization concerns, the addition of 3.95 million tons indicates industry expansion.

III. Export Surge: Record Growth and Geopolitical Shifts

Exports achieved a historic breakthrough, fueled by geopolitical and market forces.

• NPK compound fertilizers: 326,800 tons (a 262% increase year over year).
• NPK binary fertilizers: 1.42 million tons (a 520% year-over-year increase).
• Key destinations (by volume):

1. 1. Brazil (35%), driven by agricultural expansion and competitive pricing.
   2. India (22%): Benefiting from China’s strategic substitution of phosphate fertilizers.
   3. Vietnam (15%): Leveraging its proximity to and rising demand in Southeast Asia.

• Import decline: -454,000 tons (-14% year over year), primarily from Europe. This reflects China’s growing self-sufficiency and export competitiveness.

1. Core Drivers of the Export Explosion

Four interlinked factors fueled the surge in exports:

1. Strategic Substitution: China’s compound fertilizers (e.g., NPK blends) replaced traditional phosphate fertilizers in key markets by providing cost-effective combinations of nutrients.
2. Pricing Advantage: Lower production costs, resulting from economies of scale, government subsidies, and efficient raw material sourcing, allowed China to undercut global competitors, especially in price-sensitive markets like Brazil and India.
3. Global Supply Chain Reconfiguration: Disruptions in Western supply chains (e.g., geopolitical tensions and logistics constraints) created opportunities for Chinese exporters.
4. Policy Support: Government incentives, export tax exemptions, and logistics facilitation expedited shipments, aligning with food security goals abroad.

V. Outlook and Challenges (H2 2025):

Key Trends and Risks for the Second Half of 2025:

• Domestic Priorities: Policies will prioritize food security and balance export quotas to ensure stable domestic supply.
• Export Potential: Brazil and India’s reliance on Chinese fertilizers could sustain growth; however, they face competitive threats from emerging Southeast Asian producers (e.g., Indonesia).
• Raw Material Volatility: Fluctuating global prices of sulfur, natural gas, and potash could erode cost advantages.
• Sustainability Pressures: International scrutiny of environmental impacts may necessitate more sustainable production methods.

Conclusion: A Strategic Crossroads

China’s compound fertilizer industry has capitalized on global market disruptions to achieve record exports while maintaining domestic equilibrium. However, its success hinges on navigating two critical fronts: balancing food security needs with export opportunities and adapting to evolving global trade dynamics and sustainability expectations. As geopolitical tensions persist and regional competitors emerge, China must consolidate its pricing advantage through innovation and policy agility to remain a leader in the fertilizer market.