Sinofert sees limited impact after increase in urea export levy

PUBLISHED : Saturday, 29 December, 2007, 12:00am
UPDATED : Saturday, 29 December, 2007, 12:00am

Sinofert Holdings, the mainland's largest fertiliser importer and distributor, said the recent rise in fertiliser export tax would not have a big impact on its operation.

Chief financial officer Zhang Baohong said after the company's special shareholders' meeting that the firm's exports accounted for less than 10 per cent of its sales volume.

'The tax rise was to secure domestic supply and promote price stability. The government does not want to see huge price volatility, so there is seasonality in this tax,' he said.

The Ministry of Finance on December 21 published changes to the country's import and export taxes, which will take effect on January 1.

The export tax on urea has been set at 30 per cent for next year's first quarter, 35 per cent for the second and third quarter, and 25 per cent in the fourth quarter. This compared with 30 per cent in this year's first three quarters and 15 per cent in the fourth quarter.

According to General Administration of Customs figures, the nation's urea exports soared 249.4 per cent in the first 10 months of the year to 2.81 million tonnes.

Brokerage China International Capital Corp projected in a research report for the full-year that export volume would exceed five million tonnes, because lower fourth-quarter export taxes stimulated export.

The huge export growth has tightened domestic supply and sent domestic urea prices higher.

Mr Zhang said given the climbing prices for urea overseas coupled with the supply constraints and mainland production cost increases capped at less than urea price rises, mainland producers would still find it lucrative to export, even taking into account appreciation of the yuan and the export tax.

Meanwhile, he said the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, which represents mainland importers of potash, or potassium fertilisers, had just begun talks with foreign suppliers.

He would not comment on the progress. The world's largest potash trader by volume, Belarusian Potash, has reportedly raised prices for its Asian customers by 10 per cent to US$400 a tonne.

The mainland is the world's second-largest potash consumer and relies on imports for more than 60 per cent of its consumption. Sinofert is the nation's largest potash importer.

Sinofert shareholders yesterday voted in favour of the acquisition of a 40 per cent stake in Tianji Sinochem Gaoping Chemical Engineering, a 51 per cent stake in Sinochem Shandong Fertiliser and an 18.49 per cent in Qinghai Salt Lake from parent Sinochem Corp for a total of HK$7 billion.

Sinofert shares yesterday rose 1.87 per cent to HK$7.08.