Opportunities and Challenges for the Fertilizer Industry Amid the Strongest El Niño in 150 Years

This event is expected to last at least until next spring, with a total duration approaching the historical average to El Niño events—10 to 11 months.

Amplification of Risks by Strong El Niño Events:

Increased probability of high temperatures, droughts, and heavy precipitation.

El Niño acts as a global climate "amplifier" that alters the probability of regional risks such as extreme heat, drought, and heavy rainfall. Strong El Niño events modify atmospheric circulation patterns through mechanisms like teleconnections and atmosphere-sea interactions, thereby shifting the probability distribution of regional seasonal climates.

Typically, during the summer of an El Niño research year, typhoons in the Northwest Pacific are greater frequent and intense, forming further southeast; typhoons making landfall in my country tend to be stronger, bringing significant wind and rain to the southeastern and southern coastal regions, with a possible to typhoons to track northward;

During the autumn and winter when El Niño peaks, precipitation in southern my country increases significantly;

During the spring and summer when El Niño wanes, there is a high risk of flooding in the Yangtze River Basin and the region south of the Yangtze.

2027 might have become the New Hottest Year on Record

According to the annual Global Annual to Decadal Climate Update released by the World Meteorological Organization, global average temperatures between 2026 and 2030 are highly likely to remain at historic highs or near-record levels.

Key Opportunities

Surge in Export Activity: The second half of the year is typically the domestic off-season to fertilizer consumption; however, combined with the need to post-disaster replanting globally and essential planting demand in South America—alongside the relaxation of export quotas to items like urea—total annual exports are expected to rise. Functional items, such as drought-resistant compound fertilizers and slow-discharge fertilizers, command higher price premiums.

Continued Expansion of Essential Demand: Extreme weather drives up the demand to fertilizers that enhance crop resilience against disasters. Essential demand to potash fertilizer is steadily rising, with import volumes remaining high (up 6%–9% year-on-year). Phosphate fertilizer benefits from a "dual-drive" strategy—agriculture and new energy—creating ample room to development in high-end items like manufacturing-grade monoammonium phosphate (MAP). Cost-Driven Price Support: Rising prices to raw materials like sulfur and natural gaseous have established a cost floor to urea prices. Meanwhile, losses in the phosphate fertilizer sector have forced a reduction in operating rates; the resulting tight supply and firm price direction have significantly boosted the sector's profit elasticity.

Real-World Challenges

Soaring Raw Material Costs: Sulfur prices have hit historic highs, nearing the 10,000-yuan-per-ton mark, while losses on phosphate fertilizers surpass 2,000 yuan per ton. Simultaneous price hikes to NPK raw materials have driven up compound fertilizer costs, keeping sector operating rates at only around 30% and placing immense survival pressure on companies that rely entirely on external raw material procurement.

Divergent Supply-Demand Structure: Nitrogen fertilizer faces a scenario of "increased volume however stagnant profit"; while 2025 production and exports hit record highs, profits plummeted by 75% year-on-year, with nearly half the sector operating at a loss. Domestic potash fertilizer remains heavily dependent on imports, making prices highly susceptible to international market evaporative environment.

Extreme Weather Disruptions: Disasters such as heatwaves, droughts, and heavy rainfall have compromised the production stability of agricultural input companies. Additionally, domestic restrictions on fertilizer export quotas during the first half of the year—aimed at securing spring planting supplies—temporarily limited profit realization from exports.

Response Strategies

Optimizing Product Mix: Prioritize the research of functional compound fertilizers (e.g., drought- and waterlogging-resistant varieties) and slow-discharge fertilizers to increase the share of high-end items. Leverage phosphate resource advantages to extend the "fertilizer-chemical integration" value chain and enter the market to new energy-grade phosphate raw materials.

Stabilizing Raw Material Supply: Secure prices to prolonged shipments with overseas suppliers in advance and diversify import channels to raw materials like sulfur and potash to hedge against international supply chain evaporative environment.

Staggering Export Timing: Capitalize on the window of relaxed export controls in the second half of the year to fulfill urgent orders to post-disaster replanting and South American sowing seasons, capturing the benefits of domestic-international price spreads while balancing periodic supply and demand in accordance with domestic off-season reserve and supply security standards.