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Who will suffer if they get involved in this mess of urea? Author/Source: China Fertilizer Network Date: 2019-07-03 Clicks: 6 As the summer fertilizer market comes to an end, the autumn fertilizer market is starting to heat up. At present, quotes and policies regarding autumn compound fertilizers have been gradually introduced in certain areas. Although the overall trend remains unclear, they may still provide some guidance. Similarly, some companies have once again introduced products with relatively low prices, as well as more flexible incentive measures such as cash rebates, subsidies, and interest calculations, focusing for now on collecting payments at reduced prices. Considering the situation in the compound fertilizer market during the first two quarters, it is highly likely that a period of relative stagnation will occur again in the autumn. Apart from demand factors, raw material prices also play an important role. Taking urea as an example, the fluctuations in its price are inconsistent; domestic industrial and agricultural demand, along with international bidding trends, constantly influence urea prices. Many compound fertilizer manufacturers face difficulties in sourcing raw materials and often get trapped in this chaotic situation surrounding urea – it can be said that those who deal with it end up in trouble. However, after suffering losses in spring and summer, these companies are forced to prioritize their core business and compete by adjusting prices. First, cost support is weakening. Recently, the price of raw materials has been volatile, with the cost of compound fertilizers showing a slight decline. The tendency among companies to rely on raw material costs to maintain prices is no longer evident. According to Zhongfei Net, the current cost of pure raw materials for the 45% sulfur-based general-purpose series nationwide is around 2,055 yuan per ton, a decrease of 30 yuan per ton compared to early June; thus, a price drop in autumn is understandable ； Furthermore, some companies make full use of their resource advantages; coupled with the higher demand for phosphate fertilizers in autumn, they are able to minimize raw material costs, resulting in a significant price advantage. Secondly, there is insufficient demand support. Since spring, the reason for the lukewarm performance of the compound fertilizer market has remained demand-related issues: downstream demand fails to be released in a timely manner, resulting in a sluggish market and declining sales. One reason for this is that farmers have poor agricultural incomes, which reduces their enthusiasm for preparing for farming activities. Taking this year’s winter wheat as an example, farmers generally say that although the yield is high, the low prices mean limited profits ； Furthermore, the heavy rainfall in some areas this summer has led to increased cases of complete crop failure or reduced yields, resulting in very low incomes for farmers. Finally, the supply is relatively sufficient. The second round of central ecological and environmental inspections is about to begin. Since December 2015, through more than three years of effort, the central ecological and environmental inspection program has completed the first round of inspections in all 31 provinces (regions and municipalities) across the country. Follow-up inspections were carried out in two batches to assess the progress made in addressing the issues identified during those inspections. Compared with the first round, some adjustments were made in the new round of environmental inspections, with a firm rejection of a one-size-fits-all approach. It is evident that the previous situations of widespread parking of vehicles and reduced production are likely to disappear; under an environment where environmental protection is a regular practice, corporate production is well protected, and it is unlikely that supply issues will affect prices. In summary, recent developments such as domestic agricultural demand and the release of labeling specifications have attracted a lot of attention to the urea market; these factors have also had a slight impact on the progress of the autumn fertilizer market. With the successive holding of meetings for company distributors, it is expected that the trends in the autumn fertilizer market will become clear by mid-July. (Feng Hongyang)