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80,000 tons of urea exported! Will there be a price increase? Author/Source: China Fertilizer Network Date: 2019-06-10 Clicks: 20 By the first week of June, official urea exports finally began: A manufacturer in Inner Mongolia stored around 80,000 tons of large-grain urea at the Qinhuangdao port. The price at the factory was 1,710 yuan per ton; excluding the profits of intermediaries, this equates to approximately 279 US dollars per ton for export； I heard that 50,000 tons have indeed been sold, with an export FOB price of around $281 per ton. During the last five days of May, the ex-factory prices of urea produced by manufacturers in Shandong’s Lianghe and Shanxi provinces, as well as in Jiangsu and Anhui provinces, increased by 10–30 yuan per ton. In regions such as the Northeast, Southwest, and Inner Mongolia, however, urea prices continued to decline. By the first week of June, the prices of urea produced by some manufacturers in these regions had returned to their original levels; the situation in the Southwest remained stable, while most manufacturers in the Northeast and Inner Mongolia saw slight price increases. Following nearly one and a half months of rising international urea prices and a month of declining offshore guidance prices for urea in China (as shown in the chart below), urea prices in China have finally aligned with international levels. Are there significant benefits for exports? Will domestic urea prices rise again in the future? On the one hand, urea exports are currently performing well, but further export developments still depend on news such as new tenders in India. As of now, the CIF price for India at the lower end has risen to 293 dollars per ton. Considering that the shipping cost from China to India is around 13 dollars per ton, and without taking into account the profits of intermediaries, the export situation for urea from China is fairly good at present; the export volume will not remain at 80,000 tons. Especially since the inventory levels of urea in Chinese ports are low, if demand in regions such as Southeast Asia or India is strong, it will help to absorb a large amount of China’s urea production, particularly for large-grain urea during the off-season period when demand is lower. It is worth noting that whenever India issues tenders, competition among international suppliers intensifies, which usually leads to a drop in international prices. As a result, the price of 1710 yuan per ton for large-grain urea produced in China is likely to no longer be sustainable. Once the off-season sets in for small-grain urea as well, overall domestic urea prices will be at very low levels. Considering only the final peak period of summer top-dressing, while exports will help support domestic prices, it still depends on the actual volume of transactions, so further observation is needed. On the other hand, after rising at the end of May, prices of domestic urea turned weak again in many areas in early June. The main reason is that the shortfall in top-dressing in the northeast, northwest, and north areas is not very significant; it is still too early to use urea as a base fertilizer for summer corn, and the production of summer fertilizers by compound fertilizer manufacturers is coming to an end, leaving them uncertain about what to do. Firstly, there is a certain amount of surplus stock in the Northeast during spring; only the prices of urea in Liaoning and Inner Mongolia have seen a slight increase. Farmers generally start using urea after June 15–20, and by then there isn’t much time left for them to stock up on urea for top-dressing purposes in the Northeast and Inner Mongolia. Urea manufacturers are likely to focus on making deliveries, so it’s unlikely that urea prices will rise significantly ； Urea prices in the northwest remain firm, mainly due to the abnormal conditions in the Xinjiang market; however, the prices for shipments to other areas are extremely low, which will to some extent prevent an increase in local prices. After all, this is the last time fertilizer will be used this year, so shipping should take priority ； Wheat harvesting is underway in areas such as Lianghe in Shandong, as well as in Jiangsu and Anhui. Recent rainfall has occurred, and it seems there will be no rain after the wheat harvesting is completed, which is very unfavorable for sowing summer corn. It is estimated that summer corn will be sown around June 15th. The amount of base fertilizer used will be small, and at that time the price of urea should remain stable or rise slightly. Urea can be used for top-dressing summer corn only at the end of June, by which time its price may have risen significantly. For now, it seems that the price increase will not last long. Secondly, the production of high-nitrogen fertilizers by compound fertilizer manufacturers is coming to an end, resulting in a gradual decrease in the demand for urea. In Linyi, the price of urea has dropped from a high of 1,980–1,990 yuan per ton to around 1,950 yuan per ton. When summer corn is sown and topdressing is carried out, high-nitrogen fertilizers and urea will compete with each other again; it remains uncertain whether their prices will rise together, depending mainly on social inventory levels and the pace of fertilizer usage. Power plants consume large amounts, while plywood factories have moderate demand for goods. The future price increases rely mainly on composite fertilizer manufacturers holding their ground and an increase in the demand from power plants. Once again, the supply side is not that problematic; compared to previous expectations, in fact, by the first week of June, all the losses had been made up for, with the daily urea production reaching 162,000 tons. Most urea production facilities will resume operations after the end of June, and some plants in Inner Mongolia and Ningxia may start producing again next week, potentially pushing daily urea production to new heights. Since the end of May, the price of liquid ammonia has seen sharp drops followed by sharp rises; however, it remains uncertain whether this trend will continue, and urea manufacturers need to be prepared to deal with it. However, those of us in the industry should not be overly pessimistic; the urea market in the second half of June is still worth looking forward to. Of course, prices will see an increase to a certain extent, starting from the level they were at after the return from the Dragon Boat Festival holiday. Summer is the last season for digesting fertilizers such as urea, high-nitrogen fertilizers, nitrogen-potassium supplements, granulated sulfuric acid ammonium, and ammonium chloride. Our manufacturers are in a somewhat delicate position: we shouldn’t simply sell off our stock in anticipation of price drops, nor should we hold onto it until later in the season hoping for higher prices. It’s important to find the right balance between purchasing and selling, and to work together with urea manufacturers and large agricultural supply companies to support market stability, so that the urea market can trend upward during summer. (Cheyan Hong)