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Excess supply: Urine prices may fall Author/Source: China Fertilizer Network Date: 2019-06-10 Clicks: 20 Recently, the overall price of urea has fluctuated; the range of changes over the past half month has been around 20 yuan per ton. At present, the typical ex-factory price of urea in Shandong is between 1900 and 1960 yuan, in Hebei it’s between 1910 and 1930 yuan, and in Henan it’s between 1910 and 1920 yuan. Prices are showing slight fluctuations. As fertilization activities in some local markets begin to pick up, the shipping process by factories is coming to an end. Although there is still a demand for urea in certain areas, it is relatively urgent, and transportation is mostly done by road. Given the current situation of urea prices, it is possible that they will continue to drop after the holiday. Firstly, the supply of urea is high. According to data monitored by China Fertilizer Network, the current daily production volume of urea across the country is 162,000 tons, with an operating rate for the urea industry at 64.82%. Although some urea manufacturers plan to carry out maintenance work, the duration of such interruptions is relatively short; moreover, some companies that have stopped production intend to resume operations in the near future. Based on past annual trends in the urea industry, the overall operating rate of urea manufacturers is higher during the summer and autumn seasons compared to other times of the year. Therefore, it is expected that the operating rate of urea production will remain high in the near term, with some industry experts suggesting that the overall daily supply volume will not fall below 150,000 tons. Secondly, market demand will decline. In recent years, urea exports have been on a downward trend. Coupled with fierce price competition in the international urea market, China’s urea does not have a price advantage in global markets. Although monthly customs data show that a certain amount of domestic urea is still exported, on the one hand, the prices are relatively low; on the other hand, a significant proportion of the urea exported is transferred through other ports. Therefore, the possibility of using exports to reduce domestic supply pressures is relatively low ； On the other hand, regarding domestic market demand, the peak demand for high-nitrogen fertilizers has passed; in autumn, the demand for such fertilizers is relatively low. At present, it is not yet the peak purchasing period for downstream compound fertilizer manufacturers and traders, so market demand remains relatively slow. The downstream sector is cautious, while buyers hold more initiative in the market. Finally, the price of urea is relatively high. At the current stage, the reference ex-factory prices for urea in regions such as Shandong are slightly below 1,900 yuan. In Shanxi, which is in a region with lower prices, the price level remains slightly below 1,800 yuan. The lowest transaction prices in Inner Mongolia are also slightly below 1,700 yuan, while in Xinjiang, the ex-factory prices range from 1,750 to 1,800 yuan. Given that companies are inclined to maintain higher prices this year, the high prices of urea have increased caution among downstream buyers. In summary, the demand for chemical fertilizers in the summer season is gradually coming to an end; overall demand for urea is declining, yet the supply from urea manufacturers remains relatively high, which keeps prices at a high level as well. It is expected that after these holidays, urea prices may drop. (Wu Wenchao)