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Urea Traders: It’s up to you to decide whether to cut prices; I have no reason to do so. Author/Source: China Fertilizer Network Date: 2019-04-19 Clicks: 2 The urea market has been volatile recently; as orders placed in advance are gradually fulfilled, overall prices have declined to some extent. Currently, the reference price for low-grade urea at production sites in Shanxi is 1940 yuan per ton (the same unit applies elsewhere)； However, overall prices in some regions have also shown signs of increase; for example, the ex-factory price of urea in Xinjiang has risen to around 1750 yuan. Corporate pricing has fluctuated only slightly, which has indeed prompted some distributors with demand to adopt a wait-and-see attitude. Apart from immediate demands, purchases of urea have been put on hold, resulting in a stalemate in the urea market. The main reasons for this situation are as follows: First, urea manufacturers are using various tactics to conceal their true intentions. As the pending orders of urea manufacturers from earlier periods are gradually being fulfilled, these companies face increasing sales pressure. Meanwhile, downstream industries in agriculture and manufacturing are building up their inventory for the spring season; although demand still exists, it is not urgent. To avoid risks to their cash flow resulting from slow sales, some companies agree to sell at prices below market rates. For example, certain factories in Shanxi concluded orders worth over 40,000 tons at a factory price of 1,900 yuan per ton, but later sold the same product at around 1,980 yuan per ton. There is thus a difference between market prices and actual transaction prices, which means that price fluctuations still occur even within the same region. Secondly, the supply in the urea market is slightly greater than demand. At present, although there is still demand in the grassroots markets of the Northeast region, large traders have basically reached their maximum purchasing levels. The purchasing volume by companies that produce compound fertilizers and blended fertilizers has also reached saturation. The actual market demand is relatively modest. Some urea-producing enterprises have recently resumed operations, and as temperatures rise, the liquid ammonia market is showing some improvement with a slight increase in the proportion of factories that switch to producing liquid ammonia. However, this represents only a minor contribution to the overall urea production volume. According to China Fertilizer Network, the national daily urea production volume is currently around 154,000 tons. Some enterprises plan to resume production by the end of this month, so there will still be pressure on overall production volumes in the future. Meanwhile, the price of urea remains higher than it was during the same period in previous years, so downstream users who still have urea in stock are hesitant to make further purchases at the moment. Finally, provide some support for agency sales. We are currently in a transition period for the fertilizer market between spring and summer; demand exists but it is not high. Some traders say that they will not make large purchases even if companies reduce prices, while other companies maintain high prices as a form of courtesy – partly to support their agency sales, and also because price cuts do not encourage downstream buyers to make large orders. In summary, the demand for urea in the market has recently weakened. Although some urea manufacturers have raised their prices slightly, this has not been enough to stimulate purchasing activity in the downstream markets. It is expected that once these manufacturers complete the delivery of orders that are currently pending, urea prices could decline further. (Wu Wenchao)