Urea sees a modest decline, while ammonium chloride maintains its price at a higher level

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Urea sees a gradual decline, while ammonium chloride maintains higher prices. Author/Source: China Fertilizer Network Date: 2019-08-12 Clicks: 2 The nitrogen fertilizer market shows differences yet also similarities; overall, urea’s price trend is weak. Due to low domestic demand and high production levels, it is difficult for prices to remain stable, so they continue to drop. However, the rate of this decline is slowing down. Factories are being more cautious in their marketing and pricing, and traders are also being more restrained in their stockpiling, with a strong tendency to wait and observe； Affected by the urea market conditions as well as changes in domestic supply and demand, the market for dry ammonium in China is somewhat weak; manufacturers are becoming more cautious in their approaches. In contrast, the situation for wet ammonium is better, with stronger market trends. Supply is tight in many areas, leading to high prices, and a few companies are even considering raising prices further; these factories have greater confidence. Ammonium chloride, on the other hand, is seeing prices remain high due to strong market demands. At present, the domestic ammonium chloride market is operating at a high level and remains stable. There is a slight shortage of wet ammonium supply, with strong demand; in contrast, there is an ample supply of dry ammonium, but demand is weak. Some companies have higher inventory levels. Although they try to maintain high prices, these prices actually tend to decline. Additionally, some companies believe that there is a risk of a drop in ammonium chloride prices, with the expectation that prices will return to the levels typical of the normal off-season period ； Currently, the mainstream ex-factory price for wet ammonium in China is around 530–650 yuan per ton, while the mainstream ex-factory price for dry ammonium is around 680–750 yuan per ton. There is still some room for negotiation regarding the actual transaction price, which may also vary depending on the quantity ordered. The key factor that can currently boost confidence in the market is the adjustment in the operating rates of caustic soda producers. A ammonium chloride plant in North China continues to operate at reduced capacity, while some ammonium chloride manufacturers in Jiangsu have also reduced their production levels or stopped operations for maintenance. In the southwest region, due to strict environmental inspections, some ammonium chloride plants have reduced their output by half, and a few factories have been forced to shut down. According to statistics from China Fertilizer Network, the overall operating rate of the caustic soda industry has dropped to 67.9% as of now. Therefore, there are still reasons for companies in the ammonium chloride industry to raise prices. But what other factors might influence its price trends? The gradually emerging negative factors have made factories and traders more cautious. The first factor is a demand-related constraint: winter storage has not yet begun, and the market in the Northeast remains relatively quiet, with retailers adopting a wait-and-see attitude. Even though some large manufacturers attempt to offer prices for the Northeast market, the high factory prices of around 600–700 yuan per ton mean they lack any price or regional advantages, which is why it is only natural for retailers to be reluctant to accept such offers ； Secondly, the revenue from compound fertilizers in the autumn period was poor; the weak demand for other types of fertilizer raw materials led to a drop in the prices of compound fertilizers. Poor profits at the retail level, as well as changes in farming practices, also had an impact on the overall demand for compound fertilizers. In addition, under the dual pressures of environmental protection requirements and safety inspections, compound fertilizer manufacturers in certain markets operated at reduced capacity, with purchases of raw materials being carried out only as needed ； Thirdly, the trend in urea prices plays a significant role in determining the ‘fate’ of ammonium chloride. As mentioned earlier, with falling urea prices, companies that produce compound fertilizers are naturally more inclined to use urea as a raw material ； Fourth, some large ammonium chloride manufacturers will continue to operate at high capacity, particularly the dry ammonium production lines are operating at high levels; this leads to ongoing pressure on these companies to sell their products, and in some cases inventory levels even increase, which poses a risk of price declines. The overall reduction in production capacity among caustic soda manufacturers represents the biggest support for these companies, so the negative factors are temporarily on hold. Firstly, the overall operational rate of the caustic soda industry continues to decline. Due to the impact of \"sports events\" and \"parades\" in certain regions, from this month through the following month, some of the key ammonium chloride production facilities in Jiangsu, Anhui, Shaanxi, Henan and other areas will enter their off-season maintenance periods or be forced to reduce production. As a result, the supply of ammonium chloride will decrease, and operations may remain at around 60% of normal levels in the future. Shortages of this product, especially wet ammonium chloride, will be inevitable, while prices of ammonium chloride are likely to remain stable ； Secondly, the overall social inventory level of current ammonium chloride manufacturers is not high; according to market estimates, it is likely less than 500,000 tons, with some manufacturers having no inventory at all ； Thirdly, whether due to maintenance work or production restrictions imposed for environmental and safety reasons, some smaller and medium-sized compound fertilizer manufacturers in the downstream sector operate at low capacity. This may seem negative, but it can actually be seen as a potential advantage, as these companies do not have any raw material inventory; moreover, if they start operating again in the future, demand could increase sharply ； Fourth is the support of export markets for the domestic market. Overall, due to the competition between the attitudes and tactics of factories and traders, the ammonium chloride industry is inevitably faced with complexities. However, considering all the factors mentioned above, positive factors currently hold the upper hand; thus, higher prices for ammonium chloride or a slight increase in the price of wet ammonium can be considered reasonable” ； However, during the off-season, it is expected that the ammonium chloride market will continue to see price increases. But given the limited demand for new orders, it is possible that some companies will make exceptions regarding prices; therefore, it is wise to proceed with caution. (Tan Junying)