Urea price increases are based on guesses; compound fertilizer price increases are driven by demands

Thread Content

Price increases for urea are based on speculation; price increases for compound fertilizers are determined by demands. Author/Source: China Fertilizer Network Date: 2019-08-21 Clicks: 10 It’s already late August, and the weather is getting cooler. However, the fertilizer markets across the country have not changed over time, with a tense situation still prevailing. Following the completion of the initial orders for compound fertilizers, new order signings have been slow for most companies. Despite policies such as interest compensation and minimum guarantees being in place, downstream buyers remain cautious. As pressure mounts on both companies and distributors, the weakness in the market continues to worsen. Currently, the price range of compound fertilizers has widened slightly compared to the same period last year. The main reason for this is the numerous negative factors related to raw materials; the prices of nitrogen, phosphorus, and potassium-based fertilizers are all unsatisfactory. As an important factor affecting the price of compound fertilizers, the recent price of urea is rather unpredictable, with fluctuations that seem arbitrary. The future trend in its price can only be guessed. However, compared to urea, the prices of compound fertilizers are relatively stable, though any increase in their prices still relies on external pressures. First of all, there is still a surplus of demand. It is understood that in the northern regions, the main autumn crops are wheat, as seen in places such as Henan, Hebei, and Shandong. Among these, Henan is the province with the highest wheat production in China, accounting for about one-quarter of the country’s total wheat output. This autumn, the fertilizer market continued to show the same lagging trend as in previous seasons; no so-called peak-season situation emerged since its inception. Although some companies initially tried to encourage downstream buyers to place orders by offering popular products and increased discounts, given the awkward situation of price increases during off-peak times and price drops during peak times, many distributors chose to be cautious and were unwilling to take risks, even if the profits from ordering later in the period were lower. Once downstream entities concentrate on stockpiling in the middle to later stages, the market atmosphere will also ease. Secondly, supply is likely to be tight. For several consecutive weeks, the overall operating rate of compound fertilizer manufacturers has shown a slight upward trend, hovering around 48% this week. It is worth noting that during the peak production period for autumn fertilizers, the operating rate failed to exceed 50%; apart from the impact of insufficient demand, policy-related factors played a significant role in this. It is reported that in accordance with the requirements for \"winning the battle to protect the blue sky,\" a central environmental protection inspection team arrived in cities such as Tai’an and Linyi in Shandong on August 19. The intensity of these environmental inspections is likely to be greater than before, and the production conditions of fertilizer manufacturers in those areas are concerning in the short term ； Furthermore, with the approaching date of the National Day military parade, some areas will face unprecedented environmental pressures. Finally, winter storage continued one after another. The autumn market has not yet come to an end, but signs of winter stockpiling are already appearing in some areas; it is reported that a few compound fertilizer manufacturers in the Northeast region have successively announced winter stockpiling prices for advance payments. There is a certain connection in the fertilizer market during autumn and winter. Since there seems to be no sign of recovery in the compound fertilizer market this autumn, the replenishment activities on the downstream side in the later stages, along with the gradual initiation of winter storage efforts in various regions, could drive up demand and thus contribute to an improvement in market conditions ； Furthermore, raw materials are currently in a weak position; if demand remains steady, it will help boost the prices of these raw materials to some extent. As a result, raw materials and compound fertilizers will benefit each other. In summary, the weak market conditions for raw materials and insufficient demand from downstream sectors have led to a generally weak performance in the compound fertilizer market. However, as the market progresses and demand begins to increase, it is more likely that compound fertilizer prices will stabilize. Therefore, it is advisable to adopt a cautious approach or wait and see in the short term. (Feng Hongyang)