Caixin
Sep 29, 2021 09:38 PM
BUSINESS

China’s Top Two Fertilizer Firms Fined for Price Gouging

What’s new: Two of China’s largest fertilizer firms have been fined a total of 4.2 million yuan ($650,000) for price gouging on sales of potash, an essential source of nutrients for crops.

The State Administration for Market Regulation (SAMR) fined Sinofert Holdings Ltd. 2.6 million yuan, and Qinghai Salt Lake Industry Co. Ltd. (000792.SZ) 1.6 million yuan.

The regulator said both firms had substantially raised prices on potash products despite little change in production costs, violating China’s Price Law.

The context: In recent months, Chinese regulators have scrambled to stabilize skyrocketing prices of chemical fertilizers that deliver three essential nutrients — nitrogen, phosphorus and potassium. Potash is rich in potassium.

Analysts say that has been complicated by the fact Chinese fertilizers can fetch higher prices on foreign markets.

Domestic prices of potassium chloride were up more than 60% in the first half of the year.

On Sept. 24, the National Development and Reform Commission (NDRC) called for a full court press to guarantee fertilizer supplies, issuing detailed orders to regulators like the SAMR, as well as government departments and producers.

China’s top economic planner warned against fertilizer hoarding and price manipulation, calling for potash reserves to be released onto the market to ease prices, and the use of organic fertilizers where possible.

It also urged power companies in provinces such as Inner Mongolia, Henan, Shandong, and Yunnan to give priority to fertilizer producers. It is unclear how rolling power outages across the country may impact future supply.

Salt Lake is China’s largest potash fertilizer producer, with an annual potassium chloride production capacity of 5 million tons or about two-thirds of domestic capacity. Sinofert is China’s main fertilizer importer, selling 2.1 million tons of potassium chloride last year. China needs to import about 55% of its potash to meet demand.

Salt Lake said it had paid its fine on Sept. 24, while Sinofert said it had paid on Sept. 27.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Flynn Murphy (flynnmurphy@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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