A drop in urea prices is a minor issue; lack of demand is a major problem

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A drop in urea prices is a minor issue; lack of demand is a major problem. Author/Source: China Fertilizer Network Date: 2019-08-07 Clicks: 1 As August arrived, the activity in the fertilizer market was not affected by the high temperatures across the country; instead, it became even quieter. Following the completion of the first round of advance payments in the autumn fertilizer market, compound fertilizer manufacturers adopted regular interest calculation methods and minimum price guarantees, but the downstream sector was not willing to accept these conditions, resulting in a deadlock in the market. Similarly, the water-soluble fertilizer market has cooled slightly compared to earlier periods, with reduced trading activity in certain areas. The fertilizer market as a whole is facing difficulties, and people have turned their attention to urea. Indeed, as the effects of various factors related to labeling continue to take effect, there are few positive developments in China’s urea market; prices keep falling. In the short term, demand from both industrial and agricultural sectors remains weak. Therefore, urea remains a negative factor for the overall market. However, the decline in the water-soluble fertilizer market is not only due to changes in raw materials but also due to certain unfavorable factors on the supply and demand side. First, it is the off-season for demand. In recent years, as adjustments to crop planting patterns and the adoption of \"integrated water and fertilizer management\" have taken place across various regions, the demand for water-soluble fertilizers has risen sharply; in some areas, the demand for such fertilizers has even exceeded that for traditional fertilizers, resulting in less distinct seasonal variations in demand. Generally speaking, the southeastern coastal areas and the northwestern inland regions are areas with high demand for water-soluble fertilizers. Recently, the traditional peak seasons in most of the northwestern regions such as Xinjiang and Gansu have come to an end, resulting in a significant decrease in the demand for water-soluble fertilizers ； In the summer, the southeastern coastal areas experience heavy rainfall, which often halts agricultural activities and affects the progress of fertilizer preparation in downstream regions to some extent. As a result, given the varying conditions in these different areas, there is a slack season for water-soluble fertilizers. Secondly, supply is limited. It is reported that as of July 25, the 6 inspection teams out of the first batch of 8 in the second round, which are responsible for inspecting provinces (cities), have entered the phase of on-the-ground inspections ； The two teams responsible for inspecting central state-owned enterprises have entered the phase of focused inspections. This initiative will take three years to carry out the routine inspections, and another year for the follow-up assessments; an environmental protection campaign that is sweeping the whole country is still ongoing. At present, the environmental situation in certain areas where fertilizer manufacturing enterprises are concentrated is extremely severe; many small and medium-sized enterprises face the risk of having to suspend operations temporarily. As a result, there may be shortages in the supply of water-soluble fertilizers, and even during periods of lower demand, this affects the enthusiasm of downstream buyers to purchase such fertilizers. Finally, market chaos. Speaking of market disorders, the fertilizer market in recent years has been rife with various problems; phenomena such as passing off fakes as genuine products and using inferior goods in place of high-quality ones are quite common. There are even groups dedicated to deceiving people in rural areas by selling fake fertilizers. Such situations not only disrupt the normal order of the market but also reduce the enthusiasm of those involved in the purchase and sale of fertilizers. The market for water-soluble fertilizers is more chaotic than that of traditional fertilizers. One reason for this is the uneven pricing of water-soluble fertilizers, with significant price differences among products of the same type ； The second reason is that the sudden popularity of water-soluble fertilizers led to a surge in manufacturing companies, resulting in a large number of brands and chaotic market conditions; as a result, the increase in such market disorders has also, to some extent, hindered the growth of demand from downstream users. In summary, a decline in urea prices will certainly affect the overall atmosphere in the fertilizer market. Coupled with weakening demand from downstream sectors, the water-soluble fertilizer market enters a slow period; in the short term, companies will reduce production and maintain steady shipments, while prices will also see a moderate decrease. (Feng Hongyang)