Urea price crash incoming – when will prices drop?

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Urea price crash incoming – when will prices drop? Author/Source: China Fertilizer Network Date: 2019-04-08 Clicks: 20 After entering April, the upward trend in urea prices slowed down slightly. Some urea manufacturers began to reduce prices ahead of the Qingming Festival; although they claimed this was to ensure normal shipments during the festival, it was actually merely a cover to hide the price cuts. At present, the average ex-factory price of urea in Shandong is around 2050–2080 yuan per ton. In Linyi, the purchase price of urea by compound fertilizer manufacturers ranges from 2090–2110 yuan per ton. In Shanxi, the average ex-factory price for large-grain urea remains around 2060 yuan per ton. Since most factories have a large inventory awaiting shipment in the Northeast region, even though the number of new orders is low at the moment, the actual transaction prices are not significantly different from the listed prices. As urea prices continue to rise and downstream markets start to place orders, the upward trend in urea prices is slowing down. There were rumors that urea prices might drop soon, but the peak season for fertilizer use has not yet arrived in the Northeast region. Local producers and buyers are concerned about when prices will change. Industry experts estimate that this could happen either after the Qingming Festival or around mid-April. This is mainly due to the following factors: First, companies no longer have much urea left to ship. Although some companies have orders that can be fulfilled by mid-month, most of them are unable to place new orders until those existing ones are completed. Additionally, some companies have relatively few orders pending fulfillment; therefore, price cuts are likely to take effect as early as before the Qingming Festival. Secondly, the utilization rate began to rise. Recently, most urea-producing enterprises have resumed operations. According to statistics from China Fertilizer Network, the actual daily production of urea across the country was slightly above 140,000 tons in the earlier period; as production resumes gradually, the current actual production volume of urea has reached over 150,000 tons. Some of the enterprises that had suspended or reduced their production also plan to increase output in the near future. As a result, the supply volume will gradually increase, leading to greater supply pressure. At the current price levels, it is not suitable for domestic enterprises to export large quantities of urea, and there is a possibility of price declines. Finally, domestic demand will decline in the later stages. Although, based on the demand in the urea market, higher nitrogen fertilizers lead to greater demand for urea during the summer, the current period is still one of shortage. Moreover, the downstream compound fertilizer industry has already purchased a certain amount of urea as raw material, so the likelihood of further large-scale purchases in the short term is relatively low; thus, demand may face some constraints. In summary, demand for urea in the market has declined slightly recently, and procurement activities by downstream users have slowed down. However, at least in the short term, urea manufacturers will maintain stable pricing; this is partly due to existing orders that provide support, and partly to help agents with their sales efforts. Therefore, it is not advisable to stock up on large quantities of urea at present; decisions should be made once the market stabilizes. (Wu Wenchao)