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Urea prices see a slight increase; ammonium chloride takes advantage of the situation. Author/Source: China Fertilizer Network. Date: 2019-06-04. Clicks: 1. Urea, which has been the subject of much discussion, once again lived up to expectations – last week, the price of urea in parts of Inner Mongolia and Shanxi dropped to 1650 yuan per ton and 1750 yuan per ton respectively. Other regions also saw similar price drops, with many orders placed at guaranteed prices in advance； With the attitudes of suppliers and customers on the verge of collapse, large agricultural input distributors also hesitate to take any actions; they opt to purchase only as needed while waiting cautiously. End-users, in turn, prefer to buy when prices are high rather than low, showing little enthusiasm for purchasing. As a result, there is supply despite high prices at the retail level, and in such a competitive situation, it’s inevitable that both sides will suffer losses. However, with summer and the need for fertilizers approaching, whether through speculation or concentrated stockpiling, urea prices in many areas have seen a slight tentative rebound; judging from the situation in recent days, the actual impact is quite minimal. At this time, there were no major fluctuations in the price of ammonium chloride, which is closely related to this issue; however, it was still possible to take advantage of the improving situation in the urea market and bring the increasingly expensive urea under control. Currently, the domestic ammonium chloride market is in a weak state. The overall production level of companies involved in the production of caustic soda and ammonia is on the rise. These companies have few orders pending, and there has been a lack of new orders recently; as a result, inventory levels are likely to continue to increase. Left with no other choice, ammonium chloride manufacturers across the country are forced to lower their prices in order to attract customers. The areas where the decline was most noticeable were mainly in North China and Central China. For example, in North China, the average ex-plant price of dry ammonium dropped by 50–100 yuan per ton, to around 650–680 yuan per ton. In Central China, the average arrival price of dry ammonium fell by 50 yuan per ton, to around 750–780 yuan per ton. Transactions mostly took place at lower price levels; for the average transaction prices in other areas, please visit the member area of China Fertilizer Network. Let’s first take a look at how much support urea can provide to ammonium chloride. Currently, aside from a decline in urea prices in the Northeast market, urea prices have seen a slight rebound in other markets, though the increase is modest, generally ranging between 20-50 yuan per ton. This provides some support for ammonium chloride. This rebound in urea prices is still attributed to the slight increase in centralized purchases driven by fertilizer demand during the summer ； However, this wave of topdressing won’t last long, and the overall amount of fertilizer used remains limited. Particularly given the high operating rates of urea producers, the supply still appears to be excessively abundant ； Large agricultural input distributors are operating cautiously; at this time they purchase only as needed. In some areas, drought or lower temperatures have led to a delay in the use of fertilizers. Additionally, changes in the planting structure have resulted in altered habits regarding fertilizer use. The demand for urea in the local markets is under pressure, to the point where there is supply but no demand – the pressure is evident. The duration and extent of this rebound in urea prices will be limited, and its impact on ammonium chloride remains uncertain; it is not impossible for improvements to occur. Secondly, the operating rates of double-alkali manufacturers are relatively high, making it difficult to alleviate the pressure on these companies to ship their products. The traditional maintenance periods for ammonium chloride factories in June are highly anticipated. However, aside from a few large factories in Jiangsu and some large plants in Henan that are scheduled for maintenance or rotating maintenance, no other companies have indicated any plans for maintenance in June. This means that the overall operational rate of the ammonium chloride industry will remain around 70-80%, and the pressure on these companies to sell their products is unlikely to decrease. There is still little hope for an improvement in demand in the short term. Demand in the Northeast region has subsided for now; goods from various regions can only be sent back or redirected to other markets. However, the Southern market is also in a off-season period, with weak demand across the board ； The production activities of compound fertilizer manufacturers and enterprises that produce extruded granulated ammonium chloride are both declining; it is possible that some companies have stopped operations due to multiple pressures related to costs, environmental protection, and safety inspections, resulting in a significant reduction in the amount of raw materials purchased ； Similarly, traders have adopted a wait-and-see attitude or are eager to sell off their inventory, which leads to frequent drops in market prices; thus, they can only place their hopes on the off-season market. However, amid all these negative factors, the rebound in urea prices represents a great help for ammonium chloride producers. Moreover, the inventory levels of ammonium chloride companies are currently not high; if the price of soda ash continues to fall in the future, some companies may reduce their production levels or maintain relatively stable prices for ammonium chloride due to cost considerations. Finally, there have been few positive factors in the ammonium chloride market recently; amid headwinds such as an oversupply, manufacturers’ confidence is bound to waver. It is expected that the market for ammonium chloride will remain weak in the short term, with further price declines possible, though these declines are likely to be gradual due to the expected reduction in production rates in June. (Tan Junying)