Why fertilizer companies choose to be silent--written on the occasion of natural gas price increases

Starting December 26th, the National Development and Reform Commission implemented a nationwide adjustment to the ex-factory prices of natural gas. The price increases for industrial and urban gas users ranged from 50 to 150 yuan per 1,000 cubic meters, while the cost for gas used in fertilizer production rose by 50 to 100 yuan per 1,000 cubic meters. This policy change directly impacts the production costs of fertilizer companies that rely on natural gas as a key raw material. However, what struck me most was the silence from these companies, despite such a significant shift. After repeated attempts to get more information, they finally shared their concerns: fear of angering their gas suppliers. This situation is both surprising and revealing. Gas companies, which should act as intermediaries between producers and consumers, seem to be in a vulnerable position. The recent price hike means that manufacturers using natural gas for fertilizers are facing steep cost increases. For example, in the case of urea production, with a gas consumption rate of 800–900 cubic meters per ton, the additional cost per ton could be between 80 and 90 yuan. For a company producing 300,000 tons annually, this translates into over 200 million yuan in extra costs—no small amount. Despite being aware of this financial burden, many fertilizer companies remain quiet. They avoid speaking out due to the risk of losing their gas supply. If they challenge their suppliers, they might face cuts or even complete disconnection, which would cause far greater losses. Their hesitation is understandable, given the power imbalance in the market. This dynamic highlights a deeper issue: the lack of competition in the natural gas sector. Many fertilizer companies have faced production halts or reductions due to gas shortages. For instance, at the start of the year, Da Hua suffered a two-month shutdown due to gas supply issues, resulting in losses exceeding 40 million yuan. Other companies, like Henan Zhongyuan Dahua Group and Shaanxi Xinghua Group, also experienced similar problems. While there are multiple causes behind these shortages, the central issue remains the monopoly in the natural gas supply chain. The government’s reform aims to align natural gas prices with alternative energy sources and create a dynamic pricing mechanism. This goal is commendable. However, under the current monopolistic structure, it's unlikely that a fair and flexible pricing system will emerge. If gas-head fertilizer companies ever gain the confidence to negotiate, the natural gas price would likely surge significantly, as the monopoly would no longer hold sway. In that scenario, all parties would be on equal footing, and the "God" of the industry would finally have a voice.

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