Dynamic overcapacity modelling of early warning system for phosphorus fertilizer industry in China

In recent years, due to significant overcapacity in China’s phosphorus fertilizer industry, the pressure of industrial capacity reduction issue has been existing for a long time. The study contributes to establish a dynamic early warning system of overcapacity to provide meaningful insight for optimizing managerial policies of phosphorus fertilizer industry in China. The dynamic early warning system includes a novel and comprehensive evaluation model, and the commonly used entropy method is applied to effectively demonstrate the degree of overcapacity. Then, the GM (1,1) grey model proposed provides future production scenarios. Several useful conclusions can be obtained. First, the overcapacity of phosphorus fertilizer has been existing for a long time and is characterized by periodicity, and more obviously, overcapacity deteriorate significantly in 2011 and 2015. Second, the greater threat would be the excessive growth and low utilization rate of new capacity of production, and the higher volatility of phosphorus fertilizer price but relatively low profit for phosphorus companies. Third, the significant increase of raw material price, labor and transportation cost and financing cost will restrict the development of the overall industry in the future, and we highlight the more comprehensive policies to consider the uncertainties in the overcapacity issue in the long term.