Urea fluctuations: I don’t care what you think; I only care what I think

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Urea price fluctuations: I don’t care what you think; I only care what I think. Author/Source: China Fertilizer Network. Date: 2019-08-26. Clicks: 8. With the current shipping schedule from India in place, demand for international urea has temporarily decreased. In the domestic market, sales of fertilizers for autumn are at a moderate level. Raw material stocks in compound fertilizer factories are being used up slowly. Downstream industries such as plywood manufacturers and power plants also show no signs of making large purchases at the moment. As a result, urea prices remain weak overall, although there was a slight decline in prices last week. Currently, the average ex-factory price of urea in Shandong is 1770–1780 yuan per ton. In Linyi, the price at which compound fertilizer companies purchase urea has also dropped to 1790–1800 yuan per ton. In Hebei, the average ex-factory price of urea is 1750–1830 yuan per ton； In the Henan region, the standard ex-factory price of urea is 1,770–1,780 yuan, while the actual transaction price there ranges from 1,740–1,750 yuan. In areas where urea is produced, prices have only declined despite various negative factors; many in the industry find this hard to understand. In fact, previous increases in urea prices led some in the industry to adopt a more casual attitude toward it. Some traders are choosing to avoid dealing in urea at present and are staying on the sidelines. The main reasons why this off-season period is not as quiet as usual are as follows: Firstly, the production levels of urea manufacturers have started to decline slightly, with further drops expected. Recently, due to issues such as poor sales and equipment failures in some companies, there have been signs of a decline in the operational capacity of urea production plants in China. According to statistics from China Fertilizer Network, the current daily output of urea across the country is 147,100 tons. Given the maintenance plans of these factories, it is expected that urea production will remain at low levels in the near future. On the other hand, due to environmental regulations and the National Day holiday, urea production in regions such as Shandong, Shanxi, Henan, and Hebei is likely to face restrictions or even halts in production. Although overall market demand is currently low, companies have relatively less pressure related to inventory storage, so the likelihood of significant price cuts in the short term is low, even during this period of weak demand. Secondly, some companies still have orders pending at low prices. Urea manufacturers in areas such as Lianghe in Shandong all have, to some extent, orders at low prices that are currently being fulfilled. On the one hand, even if they reduce the prices of urea, market demand remains limited, so there won’t be a significant increase in the number of orders placed. On the other hand, these manufacturers do this in order to support their own agents in making sales. For these reasons, the overall price of urea does not drop sharply during periods of weak market demand. In summary, based on the current conditions in the urea market, there are still signs of a decline in overall urea prices (at present, the price of urea exported from Xinjiang has dropped to around 1300 yuan). However, the rate of decline in urea prices in areas such as the two rivers regions in Shandong is not very fast. Given the lack of positive factors at this stage, it is unlikely that actual urea transaction prices will see any increase. (Wu Wenchao)