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Urea: Label price 300$? Is our country raising prices cautiously? Author/Source: China Fertilizer Network Date: 2019-07-01 Clicks: 10 As is well known, on the evening of June 24, India issued a new tender for the purchase of urea, which was the fourth such tender this year. The submission deadline was July 1, the valid period for submissions lasted until July 8, and the shipment was scheduled for August 16. Speculations regarding the outcome of the bidding in India focus on a price range of $300 per ton CIF or slightly lower; if prices remain reasonable, India might win the bid for 1 million tons of urea. If this becomes a reality, it will represent a significant increase compared to the previous CIF price of $285.7 per ton. As of June 28, the ex-plant prices of urea produced by manufacturers in Shandong’s Lianghe area have risen by 10–20 yuan per ton. Is this another attempt to drive up prices ahead of the bidding process in India? Is it time to raise prices reasonably in the second half of the summer fertilization period? First of all, we need to recognize that due to the slow progress in the development of new urea production capacity in India, procurement tenders will be a regular occurrence there. With each tender, there is speculation and price increases; it’s all part of a pattern, with only the specific reasons for speculation changing from time to time, as well as the ratio between speculative price increases and actual price rises. Similar to previous tenders, the prices of key urea suppliers such as those in the Middle East have risen to high levels (290 USD/ton FOB and above), while urea prices in China have dropped to a level suitable for export. By holding a tender at this time, India is once again attempting to bring down the prices of urea in regions such as the Middle East. It is difficult for the minimum bidding price to reach 300 dollars per ton CIF India; if it is 295 dollars per ton CIF, considering the shipping cost from our country to the east coast of India at around 13 dollars per ton, plus fees and intermediaries’ profits of about 2 dollars per ton, the ex-ship price of urea from our country is only 280 dollars per ton. At an exchange rate of 6.87, with average port charges of 60 yuan per ton, the price of urea delivered to major ports such as Yantai Port in our country amounts to only 1,790 yuan per ton, which provides little support for the factory price of urea in our country ； Even at $300 per ton upon arrival in India, and $285 per ton for exports from our country, the price at our ports is 1,823 yuan per ton. This is still lower than the export price of 1,710 yuan per ton agreed upon by manufacturers in Inner Mongolia at the beginning of June. As mentioned earlier, this is already the fourth round of bidding in India, and adopting a strategy of submitting fewer bids but more frequently will remain its main approach. Secondly, since early June, China’s total urea exports have amounted to around 300,000 tons. This is the real reason behind the cautious upward trend in prices among Chinese urea manufacturers. In particular, inventory levels of urea at Chinese ports are low (around 200,000 tons). If demand for urea increases in countries such as India or Southeast Asia, it will help to absorb a large amount of China’s urea production, especially that of large-grain urea for which the demand season has already peaked. Considering only the final peak period of summer top-dressing, while exports will help support domestic prices, it is primarily the actual volume of exports that provides support for urea prices in our country; close monitoring is required ； The shipping date from India is August 16, and until then, the urea market in our country will remain sluggish; this tender is truly an opportunity to take advantage of the current situation. Once again, the supply and demand situation for urea in our country is worse than expected. At present, the daily total production remains around 160,000 tons. Prices of liquid ammonia are weak, and few urea manufacturers have plans for maintenance; therefore, unless anything unexpected happens, urea production will continue to remain at high levels. Recently, high-nitrogen fertilizer production by industrial compound fertilizer manufacturers has come to an end, and the production of autumn fertilizers has started slowly; the average operating rate of large-scale factories is only slightly above 40%. Industrial power plants have received only a small increase in orders, while there has been no improvement in the situation for industrial plywood factories ； Currently, the preparation of fertilizers for summer corn and rice cultivation in the agricultural sector is progressing slowly (the peak period for preparing fertilizers for rice cultivation in regions such as Jiangsu and Anhui has already passed). The shortfall in fertilizers needed in the northeast and northwest regions is minimal, while in Inner Mongolia, the process of fertilizer preparation has been completed relatively quickly (the price at the point of sale has dropped to around 1,700 yuan per ton). As of now, urea manufacturers have limited inventory, and there is not much stock ready for shipment. It is necessary to raise prices by a small amount, 20-30 yuan, in a cautious manner to create a certain atmosphere; this is a practice that benefits all manufacturers ； However, the winning bid price in Indian tenders is unattainable; by the time the won goods are shipped (after the 8th), the period for summer topdressing has already ended, so only a slight increase in the quantity won can be expected ； Once urea prices in our country soar, within 8 to 10 days, once India announces the bidding prices on July 1 – that is, once the lowest bidding prices are set – urea prices in our country will drop instantly. Rather than it being the $300 labeling fee that caused an increase in the price of urea in our country, it’s more accurate to say that urea prices rose in our country due to uncertainty regarding the labeling rules and the ongoing demand in the summer market. It is worth noting, however, that there is fierce competition among urea manufacturers when it comes to selling their products externally, which makes it difficult for prices to rise. (Che Yanhong)