Urea prices want to rise or fall – whether you like it or not

Thread Content

Urea prices fluctuate up and down; whether you accept it or not. Author/Source: China Fertilizer Network. Date: 2019-08-23. Clicks: 76. The introduction of urea futures in the recent past has sparked a lot of discussion in the market. Whether it was initially used to manipulate the spot market or not, and regardless of the current decline in interest in these futures, the urea spot market has experienced repeated fluctuations in price. When industry insiders, especially those at the grassroots level, analyze the urea market, it is not difficult to observe an unwritten rule: it seems that \"whether urea prices rise or fall, it doesn’t matter whether you accept it or not.\" Currently, urea market prices are generally falling. As it is the off-season for agricultural demand, and with end-users adopting a cautious attitude, the pace of stock accumulation is slow; no such activities have been initiated yet ； Industrial production is low, purchases are carried out on a demand-driven basis, and the much-anticipated autumn fertilizers do not look promising; as a result, the industry holds a pessimistic view regarding the overall trend of urea prices. 　　First, if production doesn’t decrease, there will be few signs of a recovery in the market. According to statistics from China Fertilizer Network, the overall operational rate of urea-producing enterprises has dropped to 59.82%, with a daily urea production of around 150,100 tons; given the weak demand, there is still an oversupply. However, due to the continuous decline in urea prices recently and the relatively high prices of liquid ammonia, some companies have shifted their production focus to liquid ammonia, which has more or less alleviated the shipping pressures on urea manufacturers. Yet this represents only a minor relief; and if the liquid ammonia market continues to weaken, companies will once again shift their production focus back to urea, considering factors such as storage and transportation. September is approaching, and some regions have indicated that in order to prepare for the \"70th anniversary celebrations,\" fertilizer and chemical manufacturing plants in those areas will see their production restricted or halted in September, with urea manufacturers being no exception ； Previously, some enterprises in Henan had indicated that they would hold a \"National Sports Festival\" from September 8th to September 16th; as a result, production at certain fertilizer or chemical manufacturing companies would be restricted. This means that the operational rate of the urea industry will decline during September. There are hopes or signs of an improvement in market conditions, but this affects only a few regions. Low-priced urea continues to be shipped out from areas such as Xinjiang, and the collection of urea at ports has also been completed. Therefore, it is unlikely that the operational rate of the urea industry will remain low for an extended period, and any expectations of market improvement should be viewed with caution. 　　Second, demand is weak, and end-users are more cautious. During the off-season in agriculture, it can be said that end-users pay little attention to fertilizers. On one hand, some large agrochemical suppliers or local markets have varying levels of inventory; especially as urea prices decline, and since it is believed that prices have not yet reached their lowest point, there is greater caution regarding stockpiling for this period, which in turn forces manufacturers to reduce prices step by step ； In addition, some large agrochemical companies have said that although they plan to build up stockpiles in the near future, they will do so as needed, with the accumulation of supplies taking place over the entire second half of the year. Demand in the industrial sector is also not promising; with frequent environmental inspections, the operating rate of plywood factories remains low ； Some companies stated that the 7th World Military Games will be held in Wuhan, Hubei, from October 18 to 27, 2019, while other fertilizer manufacturers said they would suspend production around early September in response to this call ； Additionally, during the 11th Military Parade, the production of some compound fertilizer or urea manufacturers in the surrounding areas is also bound to be affected. 　　Thirdly, the price trend of ammonium chloride also influences urea to a certain extent. Currently, the dry ammonium market is operating in a weak state, with wet ammonium still being superior to dry ammonium. It is difficult to maintain stable prices for dry ammonium; instead, prices can only decline gradually. This downward trend has prompted some compound fertilizer manufacturers to consider using ammonium chloride as a substitute for some of the urea, based on cost considerations. 　　Overall, it is difficult to find positive factors that can support the urea market, whether in the agricultural or industrial sector. Moreover, urea itself can be used as an opportunity for speculation whenever there is any sensitive factor at play; as the saying goes, \"Urea’s price can go up or down, regardless of whether you like it or not.\" Based on the supply and demand analysis presented in the article, it is expected that in the short term, urea manufacturers will face a sluggish market situation due to high production levels, weak demand, and the substitution of urea by other alternatives; as a result, there is a risk of further declines in prices, both at the local level and in the wholesale market. 　　　(Tan Junying)