China’s blue sky mix for the Olympics is choking fertilizer production

China's blue sky mix for the Olympics is choking fertilizer production

As Beijing ramps up pollution controls in the lead up to the winter games in February, more urea factories could be asked to suspend or cut output. China, a key supplier of urea, sulphate and phosphate to the global market, has curbed fertilizer exports since late last year to protect domestic supplies, a move that worsened a global price shock and risked stoking food inflation further.

China’s urea plants are becoming caught up in Beijing’s drive to guarantee blue skies for the Winter Olympics, which includes requesting factory closures to curb air pollution. Three plants in northern Shanxi region were approached to start operating at 50% capacity because of contamination, driving up domestic costs for the nitrogen fertilizer, said Scotiabank expert Ben Isaacson. Futures in Zhengzhou rose practically 5% on Friday to the most noteworthy since October, yet have pared gains this week.

“Chinese exportable supply is firmly out of the market through May,” said Bloomberg Intelligence analyst Alexis Maxwell.

The outlook for urea is also dependent on the cost of energy sources like coal and natural gas, which have risen around the world due to shortages and winter heating needs.

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