A Kingdom Built of Fertilizer(3)

On December 22, Gao Hucheng, vice-minister of the Ministry of Commerce, took charge of the potassium imports coordination council. Although Sinochem and the China Agricultural Resource Group both firmly opposed any revamping of the system, the Ministry of Commerce ultimately established a new guiding principle, that all of the concerned associations would work together on negotiating prices with foreign exporters.

On January 4th of 2006, the Ministry of Commerce held a meeting that once again affirmed vice-premiere Wu Yi's memo regarding reforming the potassium fertilizer trade, and stressing the need to cement the power to import potassium fertilizer for eight firms.

In mediating how much share the firms should have over the imports, the Ministry called for Sinofert and the China Agricultural Resource Group to receive 80 percent, with the remaining 20 percent to be split among the remaining eight firms.

But Sinochem and the Resource Group disagreed that different contracts should be signed. In the end, the Ministry of Commerce had to personally coordinate the issue, and forced the remaining eight firms to sign contracts with the former two firms' overseas subsidiaries. One spokesperson from a chemical fertilizer company from Hebei province said, "They didn't let us directly sign contracts with overseas suppliers…so 100 percent of the trade fell back into the hands of Sinofert and the Resource Group."

That same year, the six firms found a proxy with even greater buying power: Sinopec, who had agreed to represent the firms for free, and who theoretically had buying power even greater than Sinochem and the Resource Group. No one foresaw that Sinopec would unilaterally withdraw from the agreement by June.

By the end of 2006, Wu Xiyan, president of the China Fertilizer Phosphate Association, along with the International Fertilizer Industry Association's chairman, Wu Sihai, jointly delivered a letter to Wen Jiabao, the State Council's premiere, regarding the monopoly. Wen Jiabao responded.

"The result was that the Ministry of Commerce held a meeting of various ministries, the National Development and Reform Commission, the Ministry of Agriculture, and others, but until the beginning of this year they still had been unable to put out a feasible plan," says one participant of the conference.

During this year's twin congresses, Zhou Furen, director of the board at Liaoning West, Ping Yisheng, his counterpart at Shandong Lubei Corporation, along with Zhong A Chemical's president Wu Sihai, three other representatives, and Wu Xiyan visited the foreign trade office of the Ministry of Commerce. According to Zhou Furen's recollection, debate during the meeting was intense and sour. The event became widely spoken of throughout the industry, and Zhou became famous for making "a big fuss at the Ministry".