Urea prices are fluctuating wildly; compound fertilizers are taking detours

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Urea prices fluctuate wildly; compound fertilizers have to find alternative routes. Author/Source: China Fertilizer Network Date: 2019-08-26 Clicks: 7 By late August, more than half of the production period for autumn fertilizers had passed, and the market for compound fertilizers entered the shipping phase. However, recently there have been frequent fluctuations in raw material prices, typhoons that caused disruptions, and environmental regulations that restricted production. Thus, compound fertilizers faced one difficulty after another during this period, and to cope with these challenges, they could only resort to finding alternative routes to solve the problems. Firstly, raw material prices are volatile, especially urea. In August, prices of simple fertilizers experienced frequent fluctuations. The price of diammonium phosphate dropped significantly, while the price of ammonium phosphate also fell slightly. Although potassium fertilizer prices saw little variation, there were occasional major rumors surrounding them. The most concerning issue was urea: since the introduction of urea futures, its prices have been more volatile than before. Initially, prices kept falling, until small-grain urea was being sold at 1,520 yuan per ton in regions such as Inner Mongolia. As a result, some companies received many orders, which drove down the low prices; in some cases, prices even rose again. However, this good situation did not last long, as demand for urea in the market was low during that period, with little demand for industrial compound fertilizers and plywood. Soon, urea prices dropped again. Currently, the average selling price of urea in Shandong and Henan is around 1,730–1,750 yuan per ton, while in Shanxi it is 1,650 yuan per ton. There are rumors of tenders in India, but it’s still unclear whether this will be good or bad news. Secondly, the price trends of compound fertilizers remain unaffected, with tight supply in some areas. Although the prices of urea and monoammonium diammonium continue to fall, which makes it difficult to maintain stable prices for compound fertilizers due to the high cost of raw materials, the price of ammonium chloride remains high, and potassium fertilizer prices are also relatively high. Overall, therefore, the decline in the prices of some raw materials has little impact. The most crucial factor is that the collection period for autumn fertilizers has reached its middle to later stages; in some areas, the distribution of wheat fertilizers is already under strain. Some compound fertilizer manufacturers did not prepare enough raw materials in advance, and environmental and safety inspections in certain areas have restricted production, so shortages in supply in those areas are inevitable. Finally, compared to the trends in raw material prices, the performance of the compound fertilizer market in August was surprisingly calm. On one hand, compound fertilizer manufacturers had already completed their collection of payments earlier on, and reducing prices during this period would hinder the smooth delivery of products ； On the other hand, there is a need to restock autumn fertilizers later on, and since the cost of raw materials remains relatively stable, price adjustments at this time are not conducive to the smooth distribution of autumn fertilizers. Overall, it has been difficult to collect payments for fertilizers this autumn, and shipments have been slow. However, if the procurement of raw materials is carried out in a proper manner, profits from fertilizers this autumn can still be considerable. After two or three years of industry consolidation and adjustment, the market for compound fertilizers has reached a relatively stable state, which certainly contributes to better development of the market conditions in the future. (Yang Xiaomei)