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

Starting from 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 usage across all oil and gas fields ranged from 50 to 150 yuan per 1,000 cubic meters. Meanwhile, the ex-factory price for natural gas used in fertilizer production rose by 50 to 100 yuan per 1,000 cubic meters. This policy shift has clearly raised production costs for fertilizer companies that rely on natural gas as a raw material. What caught my attention was that most of these companies remained silent about this significant change. After repeated inquiries, they finally admitted their reluctance: fear of offending their gas suppliers. This situation is quite revealing. Gas companies are often seen as the "God" between producers and users, yet in reality, they are the ones facing pressure. The increase in natural gas prices directly translates into higher costs for fertilizer manufacturers. Take the urea industry, for example. With a maximum gas price increase of 100 yuan per 1,000 cubic meters and a gas consumption rate of 800–900 cubic meters per ton of urea, the cost per ton could rise by 80–90 yuan. For a company producing 300,000 tons annually, this would result in an additional cost of over 200 million yuan. That’s a substantial amount for any fertilizer producer. However, when I interviewed these companies, they revealed that they had been aware of this cost increase for a long time. They knew exactly how much it would cost each year but chose not to speak out. Their reasoning? They didn’t want to risk angering their gas suppliers. If they did, they might face supply cuts, which would lead to even greater losses. It's understandable why these companies are cautious. Isn't it because of gas shortages that some fertilizer plants have had to halt or reduce production? At the beginning of the year, Dahua suffered a two-month shutdown due to gas supply issues, resulting in over 40 million yuan in losses. Companies like Henan Zhongyuan Dahua and Shaanxi Xinghua also faced production cuts due to insufficient gas. While there are multiple reasons behind these shortages, the monopoly of natural gas supply remains the core issue. This is a major concern for downstream fertilizer companies. According to reports, the goal of this reform is to rationalize price relationships with alternative energy sources and establish a dynamic pricing mechanism. This objective is commendable. However, under the current monopoly system, it’s unlikely that a true, flexible pricing mechanism can be established. If one day, gas companies dare to negotiate with suppliers, the price of natural gas will likely be far higher than it is now. Because at that point, the monopoly would have been broken, and “God” would no longer be afraid to express their needs. Everyone would then stand on equal footing.

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