Urea: Can it rise any further?

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Urea: Can it rise any further? Author/Source: China Fertilizer Network Date: 2019-06-26 Clicks: 8 Last week, the price of urea increased by 20–30 yuan per ton; however, some companies had not yet felt the effects of this price rise. This week, urea prices dropped again (with the exception of Xinjiang, where demand is high and supply is relatively tight among most companies; the ex-factory price of urea in that region has already risen to around 1850 yuan, and it is expected that there will be no further decline in prices there before July 10). Currently, the mainstream ex-factory price of urea in Shandong is 1890–1910 yuan, while compound fertilizer manufacturers in Linyi pay 1920–1930 yuan per ton for urea, with some companies offering an ex-factory price of only 1850–1860 yuan ； The mainstream ex-factory price of urea in Hebei is 1,880–1,920 yuan; overall, corporate quotes have seen a slight decline, with some companies intending to export their products. In Henan, the mainstream ex-factory price of urea is 1,890–1,900 yuan, and there is room for negotiation of 20–30 yuan in terms of the price. Demand in the local market and those surrounding it has decreased, which has led to a slight drop in prices ； The standard ex-factory price of urea in Shanxi region is 1,790 yuan; the price for large-grained urea is 1,790–1,800 yuan. Pricing can be negotiated slightly, and the quantity available for shipment is moderate. Domestic urea downstream traders are making moderate purchases. Given the current market conditions, could urea prices rise any further? Based on recent industry opinions, prices may rise, but actual transaction prices for new orders in the domestic market are unlikely to increase. Firstly, domestic market demand has temporarily come to a halt. Recently, there is still a demand for fertilizers in regions such as the Northeast and Northwest, while the overall demand in other areas is relatively low. Additionally, there is still an supply of fertilizers available at low prices from previous periods. The Northeast is about to enter the off-season for fertilizer use, whereas the Xinjiang market can sustain demand until July 10th. However, due to its geographical location and the high price of urea there, it is unlikely that fertilizers from other regions will be imported there. In areas such as northern Jiangsu and northern Anhui, although there is still some demand, the overall volume is relatively low. With the end of the summer fertilizer season approaching, demand for urea has temporarily decreased, making it difficult for urea prices to rise. Secondly, the supply of urea is excessive. According to data monitored by China Fertilizer Network, the daily actual production volume of urea across the country remains at a level slightly above 160,000 tons. Apart from a few urea production facilities that are temporarily under maintenance, most companies do not have any plans for maintenance in the short term. The operating rate of compound fertilizer manufacturers has dropped to around 40%, industrial market demand remains moderate, and the supply pressure for urea is increasing, leading to rising prices. Finally, it can be exported or stored, but the quantity and price are somewhat disappointing. Recently, there have been rumors in the international market that India and Mexico are purchasing urea. Chinese companies are relatively eager to export, but the offshore price remains around $282 per ton, with the volume of exports being around 300,000 tons. While, given the current market conditions, exports represent a positive factor for the domestic market at present, the export prices and volumes do not provide sufficient support to boost domestic urea prices. In summary, demand for urea in the market has weakened recently. Although exports provide some support, domestic transaction prices are unlikely to rise. It is expected that domestic quotes may see a slight increase when negotiating with foreign buyers, but given the relatively weak domestic demand, solid transactions will be difficult to achieve. (Wu Wenchao)