A rise in urea prices brings short-term joy; continuous price increases bring ongoing joy

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A temporary rise in urea prices brings short-term satisfaction; continuous price increases bring ongoing satisfaction. Author/Source: China Fertilizer Network. Date: 2019-03-11. Clicks: 6. Although the fertilizer market has been affected by certain factors recently, leading to a slight decline in industrial demand, urea prices have not been impacted and have remained stable throughout this period. It was previously expected that urea prices would continue to rise; in some areas, the increase has already reached around 100 yuan per ton. In Linyi, the purchase price of urea for compound fertilizer manufacturers has risen to around 1970 yuan per ton. In major production areas such as Shandong and the two river regions, some large urea producers have started to charge higher prices or even suspend sales. Even in Shanxi, where prices were previously low, the current export price for large-grain urea is around 1860 yuan per ton. With these continuous price increases, some factories report feeling satisfied; based on the current prices for new orders, the gross profit in some areas can reach around 400 yuan. There must be a reason behind everything that happens; so why did the previously pessimistic outlook turn into this enviable situation today? The main reasons are as follows: First, the resumption of operations by those companies in a volatile market situation has been delayed. It is no longer a novelty in the urea industry for companies that produce urea from gas to resume operations on a large scale. However, market reports indicate that as urea manufacturers and oil companies have not reached an agreement regarding natural gas prices, the supply of raw materials remains strained. In addition, due to certain factors, some regions have once again entered a phase of production restrictions; in places like Shanxi, such restrictions will continue until next month. Moreover, some comprehensive urea manufacturers have reduced their exports in order to meet their own future needs. Taking all these factors into account, even if industrial demand decreases slightly in the near term, the supply pressure on urea manufacturers remains relatively low. 　　Secondly, demand in the grassroots market has shown some improvement. Initially, due to the impact of late spring cold snaps, demand in the grassroots markets failed to pick up. However, as the weather improved, demand in the agricultural sector saw some improvement; for example, the agricultural markets in regions such as Henan have now started to recover. Driven by demand from downstream markets, some local companies face a shortage of goods and have therefore raised their prices. 　　Finally, advance stockpiling for industrial demand. As the launch of the grassroots market was delayed slightly this year, demand is expected to be concentrated to a certain extent. Under such circumstances, agricultural demand will continue to rise in the future; therefore, even though there is still a certain amount of finished product inventory available for compound fertilizers and similar products, further purchases will be made to ensure supply for the upcoming agricultural needs. 　　In summary, driven by favorable factors, urea prices have been rising steadily recently. However, given that corporate profits are currently relatively high, some in the industry remain concerned about market conditions in the future. Moreover, companies that rely on gas as a raw material cannot remain shut down indefinitely. It is expected that after these price increases encounter obstacles, urea prices will remain stable for only a short period before possibly declining. Therefore, it is not advisable for traders who still need to replenish their stock to make purchases hastily – firstly because of the high costs involved, and secondly because urea prices currently have relatively low resilience. It is recommended to wait before making any purchases; even if goods are acquired at higher prices, they will be held for only a short time, making it easier to sell them later. 　　(Wu Wenchao)