December witnessed a weakening in the supply-demand dynamics of China’s compound fertilizer market, influenced by a mix of environmental policies, market regulations, price trends, and shifting market sentiment. Overall caution prevailed among participants, though expectations for a recovery in January remain.
Frequent Environmental Alerts Restrict Production Ramp-up
Typically, December marks the peak production season for winter fertilizer reserves. However, environmental constraints in key production zones limited the increase in operating rates this year. In early December, Henan and Hubei issued heavy pollution alerts due to stagnant weather conditions, high humidity, and external pollutant transmission. By mid-month, a widespread pollution episode covered central and eastern China, prompting upgrades to orange alerts and Level II emergency responses in Beijing-Tianjin-Hebei and surrounding regions. Central-western Shandong and central-northern Henan experienced 4–5 days of moderate to heavy pollution, with localized severe pollution. Most of Hubei also saw 4 consecutive days of moderate to heavy pollution from December 17 due to regional transmission. Towards the end of the month, especially approaching year-end, Hubei and Hebei faced another round of persistent pollution, which is expected to ease only after cold air moves southward around January 1, 2026. Consequently, operational loads in major producing regions like Hebei, Hubei, and Henan remained generally low, with some plants experiencing temporary shutdowns, leading to supply contraction. Statistics show that the average operating rate in the compound fertilizer industry was 33.89% at the end of December, down 3.17 percentage points from the previous month and 6.98 percentage points lower than the same period last year—the lowest level in nearly five years.
Cautious Market Operations and Divergent Delivery Progress
In the first half of December, driven by rising prices, dealers showed strong enthusiasm for replenishing stocks, leading to a notable increase in deliveries in many regions. In some areas of Northeast China, retail sales progress exceeded 30%. However, from mid-to-late December, as prices climbed and policy interventions took effect, dealers slowed their procurement pace. Key reasons include: 1) concerns about a potential price correction; 2) limited acceptance of new prices amid persistent market price inversions; and 3) transportation disruptions in some areas during pollution alerts, with shipments in certain regions even declining or stalling around month-end. Additionally, most circulating goods in the market are from earlier low-priced orders, resulting in regional divergences in delivery progress: Hunan, Jiangxi, and Northeast China are ahead of last year’s pace, while most parts of North China lag behind.
Agricultural Price Fluctuations Affect End-User Stockpiling Sentiment
In December, prices of some agricultural products experienced notable fluctuations due to supply and seasonal factors. Vegetable prices followed a “rise-then-fall” trend within the month, while fruit prices generally increased. However, markets for wheat, soybeans, peanuts, chili peppers, and ginger remained weak, with month-on-month declines of varying degrees.
Market in Wait-and-See Mode, Awakening Key Breakthroughs
Current market focus centers on two aspects: first, the impact of policy interventions on raw materials like sulfur, sulfuric acid, and phosphate fertilizers; and second, whether compound fertilizer prices will show signs of softening. For now, policy adjustments continue, but without fundamental changes in supply patterns, the raw material market is likely to remain volatile at elevated levels. For compound fertilizers, cost pressures persist, leaving little room for price adjustments unless raw material costs decline significantly.
In summary, the compound fertilizer market currently faces weak supply and demand, with new order negotiations at a stalemate. However, considering the support from pending orders and the relatively late Chinese New Year in 2026, trading activity is expected to gradually improve in January. Moving forward, key factors to monitor include policy directions, price trends of major raw materials, weather changes, plant operating rates, and shifts in market sentiment.
