After both the cost and the market, they suffered from the pain caused by intestinal obstruction. Sinopec decided to avoid weaknesses and gradually withdrew from the relatively weak fertilizer business. Its subsidiary Jiujiang Petrochemical's urea plant has been shut down since the third quarter. This is the third of Sinopec's response to the strategy of exiting the fertilizer urea business before 2015. At the same time, CNOOC has made a completely different reaction from Sinopec. CNOOC has included the fertilizer industry in the key development sector four years ago, seeing it as an entry point to the upstream and downstream sectors. Recently, the expansion project of China Dahai Chemical Dagukou Co., Ltd. was officially started. After the completion of the project, the production capacity of CNOOC phosphorus compound fertilizer will reach 1 million tons.
Sinopec and CNOOC have made different choices in the fat market competition, and they are all the best strategies that companies adopt according to their respective industrial structure adjustments and development needs. From the advance and retreat of the two companies, we can see the next development direction and market structure of China's fertilizer industry.
Sinopec retired into 13 Sinopec's aging fertilizer installations in the very scarce season of chemical fertilizers in China has contributed greatly, and led a batch of chemical fertilizer production enterprises in China take root. Since then, the liberalization of the fertilizer market in China has created new facilities for fertilizers to spring up everywhere. Fertilizer companies in all sectors have competed to grow and expand, and the market has been very lively. However, after several years of fierce competition in the market, Sinopec resolutely chose to fade out of the historical stage and relent in the rapids. Experts believe this is a very wise choice.
The cost is hard to reduce At present, the increase in resource prices "eats" a large part of the company's profits, but the special nature of fertilizer products makes it impossible for companies to release pressure through downstream sales. Coupled with the impediments to exports, companies face dilemmas. The current total urea production capacity of Sinopec Corp. is 3.63 million tons/year, accounting for 6% of the country's total production capacity. It owns seven large-scale urea production enterprises in Baling Petrochemical, Zhenhai Refinery, Anqing Petrochemical, Jiujiang Petrochemical, Hubei Fertilizer, Jinling Petrochemical, and Qilu Petrochemical. Li Zhijian, Director of the Chemical and Chemical Industry Planning Institute's Chemical Fertilizer Division, said: “Sinopec can hardly relieve market pressure by reducing costs in the short term, adjust industrial structure, withdraw from weak industries that do not have competitive advantages, and concentrate on developing the main industry more in line with its The principle of development that retreats from the past and does something wrong."
Sinopec also made efforts before making its decision to exit the fertilizer market. In recent years, under the pressure of rising international oil prices, the production and operation of “oil head†enterprises in the fertilizer industry have become overwhelmed. They have invested heavily in the introduction of advanced production lines, optimized the production process, and transformed the raw material lines. In 2003, Sinopec initiated the demonstration and research on the development and utilization of coal coke chemicals in the refinery and chemical industry system, reduced the cost of oil refining and fertilizer production, and succeeded in bringing the most advanced coal technology technology in the world, Shell pulverized coal gasification technology. It was applied to the ammonia synthesis plant for chemical fertilizers, and the line of “oil to coal†and “oil to gas†fertilizer raw materials were reconstructed in 5 of the 7 fertilizer production enterprises.
Tiangong does not make US Sinopec try its best to adjust raw material routes, hoping to achieve the purpose of cost reduction and efficiency increase. However, the price of natural gas and coal also began to rise. To make matters worse, Sinopec's natural gas and coal raw material production areas are far away from the fertilizer plant area, and high transportation costs also keep its cost high. There are two reasons for the pressure on the fertilizer business, the profitability level is not ideal, and some companies even suffer losses. The industrial competitive advantage is not obvious, which restricts further development.
In the fierce market competition, only the development of enterprises can be invincible, and development is not the bigger the better the assets, the key is the proportion of the assets that can bring benefits as the better. To achieve this goal, it must be conditional on the partial withdrawal.
In recent years, with the gradual liberalization of the domestic chemical fertilizer market, China’s fertilizer production capacity has increased rapidly, and the annual urea production has increased by 47% in just five years. The growth in domestic urea market supply has been much higher than the growth in the demand for industrial and agricultural production. What is worrying is that there are still many projects under construction or to be built in China, and the domestic urea production capacity will continue to expand. Sinopec's current urea production plant is located in several places where China's overcapacity is relatively serious. This kind of decision not only benefits Sinopec itself, but also eases the surplus of China's urea production capacity to some extent.
Contrary to CNOOC, the fertilizer industry is the highlight of CNOOC's strategy of integration, and its plan for a large fertilizer industry is not a matter of overnight. In the early years, PetroChina and Sinopec were in a strong position in the refining and chemical industry. CNOOC explored new ways to incorporate the fertilizer sector into strategic planning and development, and developed a differentiated clever line.
The integration advantages are obvious. CNOOC Fertilizer can maintain the momentum of sustainable development in the adverse market. The industry believes there are two reasons: On the one hand, CNOOC integrates upstream resources, middle processing and downstream sales in the fertilizer field, and the advantages of the entire industry chain. Obviously, on the Other hand, the products are relatively abundant. At the same time, there are three series of nitrogen fertilizers, compound fertilizers, and phosphate fertilizers, which can more easily achieve the break-even within the industry in the market fluctuations.
CNOOC's fertilizer segment is mainly owned by the listed company Zhonghai Chemical. In July last year, China Chemical successfully acquired Shanxi Hualu Luyang Poquan Coal Mine and Shanxi Hualu Coal Chemical Project. Zhonghai Chemical also acquired part of the phosphate rock rights in Dagukou of Hubei Province, enabling the company to have sufficient resources to support its phosphate fertilizers and Coal urea production. To fill gaps in potash fertilizer business, China Overseas Chemical plans to invest in potash fertilizer projects overseas through acquisitions or joint ventures. Through international operations, it will strive to achieve an annual capacity of 1 million to 2 million tons of potash fertilizer. At present, CNOOC has a potash import license, and it has recently been reported that CNOOC and China National Chemical Corporation are negotiating with the Zhongchuan International Mining Holdings Co., Ltd. to invest in Canadian potash projects, which shows that the progress of this work is very clear.
It can be said that CNOOC integrated the integration strategy in all phases of the development of the chemical fertilizer industry, and successfully achieved the transformation from the development of the upstream gas field to the production of chemical fertilizer products to the formation of a significant domestic and international chemical fertilizer industry. From its initial establishment in Hainan, it relied on a single natural gas resource to develop the fertilizer industry, and it has now shifted to a national market based on a variety of resources. It is precisely the way built by sticking to the project's supporting resources to combine well the fertilization projects and resource exploitation. The CNOOC's fertilizer industry can have unparalleled low-cost advantages in market competition.
M&A Increases Competitiveness CNOOC has a relatively strong network advantage in the fertilizer sector. In October 2006, China National Chemical Construction Corporation was integrated into China National Offshore Oil Corporation. In April 2007, China National Chemical Supply and Marketing Corporation was merged into China National Offshore Oil Corporation. The two mergers and acquisitions that lasted for half a year opened up a sales pattern for CNOOC's chemical fertilizer industry.
It is understood that CNOOC Chemical plans to form an annual production capacity of about 4 million tons of urea production capacity and about 4 million tons of phosphate fertilizer and compound fertilizer in the next few years. For potash fertilizer, the company will also strive to achieve an annual production capacity of 1 million to 2 million tons through international operations, and strive to achieve a supply capacity of approximately 3 million tons in the fertilizer trade sector. And these will integrate resources through market mergers and acquisitions.
With the advantages of resources, capital, and sales network, CNOOC Limited is a rising star in the fertilizer market, with relatively new installations and advanced technology. Such goals are not difficult to achieve. Even in the downturn of the fertilizer market, it is still able to maintain a good momentum of development.
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