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Urea: mixed fortunes; what to watch for during the off-season fluctuations? Author/Source: China Fertilizer Network Date: 2019-06-26 Clicks: 6 “Changes in urea prices are like tornadoes,” was what a trader said to me recently while discussing market conditions. Last week, I regretted not making purchases in time due to the rise in urea prices and slapped my own thigh in frustration; this week, before I even had a chance to do that, urea prices dropped. The trend of urea prices is just like the weather in June – most people aren’t sure which cloud will bring rain. Recently, various positive and negative factors have influenced the urea market. As the off-season for domestic demand approaches, the author has compiled a summary of the current advantages and disadvantages related to urea, as well as a brief forecast for urea prices in the near future: Positive factors: First, domestic prices are gradually aligning with those in the international market. In recent years, the volume of urea exports has dropped sharply. The fundamental reason for this is the significant difference between domestic urea prices and international prices. Although the domestic market is experiencing a certain degree of supply surplus, prices have not yet dropped to international levels in order to alleviate the pressure resulting from overcapacity. However, international prices have been rising recently, and at the current exchange rate of 6.9, the offshore price of urea in China is 282 dollars per ton; the price at major ports in China is then 1,885 yuan per ton. Although there is still a gap between this price and the domestic factory prices, based on past export patterns, there is still some hope for urea exports in the future. Moreover, with upcoming bidding processes for urea in India, the pressure in the domestic market has eased slightly. Second, urea from Xinjiang cannot yet have an impact on prices. Urea in Xinjiang, which has been experiencing low prices recently, is now seeing a price increase. Due to the snowfall earlier in the period, the timing of urea use in this region was delayed; currently it is peak usage season, with most factories operating at full capacity and supply being relatively tight. Some factories have even offered a selling price of 1850 yuan per unit, a rate that is now on par with that of some urea producers in the Shandong region. Based on market demand, it is expected that there will be no sales pressure for local urea until July 10th, so for now urea from Xinjiang does not pose any impact on prices in other areas. Third, some enterprises have sufficient stock to dispatch. Companies have received a relatively large number of orders in the early stage; the amount of urea awaiting shipment at some companies in Shanxi will remain high until around mid-next month. Meanwhile, certain factories in Shandong, the Two Rivers region, and Inner Mongolia also have orders to fulfill, so the overall supply pressure is relatively low. Negative factors: First, domestic market demand is weak. The demand for summer fertilizers in the domestic market is nearing its end; actual market demand is relatively low at this stage. The operating capacity of compound fertilizer manufacturers is limited to around 40%, and they adopt a cautious attitude toward purchasing urea. Plywood factories and power plants have shown modest purchasing activity recently, with no large-scale orders being placed. The demand for top-dressing fertilizers in regions such as the Northeast is also coming to an end. It is still too early for autumn fertilizers, and the quantity purchased is relatively small, resulting in overall insufficient demand. Second, there is significant supply pressure. Many. According to data monitored by China Fertilizer Network, the daily actual production 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, which is leading to an increasing supply pressure for urea. In summary, although the market has seen a mix of positive and negative factors recently, it appears that overall demand, both internationally and domestically, will remain low. With urea production levels remaining high, buyers hold a relatively dominant position. While there is a possibility that urea prices could rise due to negotiations with international traders in the near term, actual price increases are unlikely to be significant. (Wu Wenchao)