Urea will break 1800! Is an increase in August okay?

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Urea will break 1800! Is an increase in August okay? Author/Source: China Fertilizer Network Date: 2019-07-24 Clicks: 8 As is well known, urea manufacturers began to lower their prices on July 13, and this trend became more evident towards the end of July. By July 23, the purchase price of urea in Linyi had dropped to around 1,890 yuan per ton, while manufacturers in Shandong and Henan were selling urea at 1,820 yuan per ton. Similar price reductions occurred in Shanxi, Jiangsu, and Anhui as well; one factory in Heilongjiang even reduced its selling price by another 70 yuan per ton. For more market updates, please visit the member area of China Fertilizer Network. As time goes by, it is inevitable that urea prices will fall below 1800. What is the reason for this? Can it break 1750? Is it feasible to raise prices in August? 　　It is certain that the price of urea will fall below 1800, and it is also possible that it could drop below 1750. 　　First, the price drop following the hype around urea will be delayed but not absent*. At the beginning of July, urea prices were supposed to start falling. However, due to India’s acquisition of a contract for 1.69 million tons of urea and China’s purchase of over 600,000 tons, urea manufacturers began shipping goods from the ports starting in late June; in other words, there was a sufficient supply of orders ready to be shipped. By mid-to-late July, domestic demand was weak, so exporting at low prices from Shanxi and Inner Mongolia became the only option. Xinjiang also had no choice but to export its products, in order to prevent these low-priced goods from affecting the markets in the central regions. Urea manufacturers in Shandong, the two provinces along the Yellow River, Jiangsu, Anhui, and Hubei saw their prices start falling, with the rate of decline even accelerating – these were all measures taken out of necessity. 　　Secondly, both industrial and agricultural demand performed worse than expected. Apart from the slight increase in urea prices driven by the final round of agricultural fertilization applications across various regions, as well as rising prices at the wholesale and retail levels, overall summer agricultural demand provides little support for the ex-factory prices of urea manufacturers ； In the industrial sector, due to the unfavorable economic conditions and environmental pressures, demand for urea from plywood factories and power plants has remained weak. Only events such as the 70th anniversary military parade helped to boost urea prices slightly, as compound fertilizer manufacturers ordered supplies in advance. However, the export price of urea is very low; therefore, these manufacturers order only what they need. Nowadays, they keep postponing their purchases, either by using ammonium chloride and sulfuric acid as substitutes for urea, or by waiting for urea prices to drop, or even until they reach cost level. Currently, it is the off-season for agricultural needs, and industrial compound fertilizer manufacturers are waiting for urea prices to drop significantly before starting production, with prices rising again alongside urea during the sales season in autumn (a price increase is just one possibility). 　　Once again, the supply level has remained high. Although there were exports of over 600,000 tons at the beginning of July, the domestic daily production of urea remained at 150,000 tons or even higher. Rough estimates show that the monthly production from April to June was about 700,000 tons higher than in the same period last year. With urea prices being too high this year, there has been an increasing use of alternative fertilizers such as ammonium chloride, sulfuric acid ammonium, and nitrogen-potassium fertilizers to replace urea. Additionally, due to the poor economic situation, industrial power plants have lower demand compared to last year, and the demand from plywood factories is much lower than it was last year. The fact that urea prices have not risen by more than 100 yuan since May illustrates well that supply exceeds demand. 　　In short, in terms of demand, the demand for fertilizer in summer is indeed at its lowest level. The peak production period for autumn fertilizers comes only around early August or even mid-August, so this does not exert much pressure on urea demand. Moreover, low-priced urea from Inner Mongolia, Xinjiang, Shaanxi, and Shanxi has already reached many markets ； On the export side, it is also necessary to wait for new tenders in India, which may appear in mid-August. On the supply side, prices are likely to remain high; the companies undergoing maintenance recently have only experienced short-term shutdowns, and urea production will soon again be at around 150,000 tons per day, or even above 155,000 tons per day. 　　In summary, whether it is the advance production of autumn fertilizers or the environmental pressures on urea production, it is only when urea prices drop significantly and conditions for an increase arise that various demanders will be willing to purchase more of it. This will likely happen in August; perhaps by then India will announce its pricing standards, or the deadline for producing autumn fertilizers may be approaching, or prices may fall above the cost level – only then will there be a significant and sustained increase in urea prices. 　　To stay updated at all times with detailed and accurate information regarding the market conditions and related details of fertilizers such as urea, as well as to understand the trends in the fertilizer market. (Che Yanhong)