Reduced supply; urea remains in a state of weakness

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Reduced supply; urea market remains under pressure. Author/Source: China Fertilizer Network. Date: 2019-08-26. Clicks: 8. Recently, the price of urea has continued to decline. Currently, the standard ex-factory price of urea in Shandong is around 1770–1780 yuan per ton (the same unit applies elsewhere). The price at which urea is sold in the lower end of the market is around 1740 yuan per ton. In Linyi, compound fertilizer manufacturers are purchasing urea at a price of 1790–1800 yuan per ton. In Hebei, the standard ex-factory price of urea ranges from 1750 to 1830 yuan per ton； The mainstream ex-factory price of urea in Henan region is 1,770–1,780 yuan ； The prevailing ex-factory price of urea for road transport in Shanxi is between 1,690 and 1,700 yuan. In Xinjiang, the price is dropping at a rate of 50-100 yuan per week, setting new lows in the domestic market; currently, the prevailing ex-factory price of urea there is between 1,350 and 1,500 yuan, with no sales at higher prices at present. It is reported that the daily physical production of urea in China has recently dropped below 150,000 tons. In addition, companies that rely on natural gas as a raw material will stock up during this off-season in order to avoid the impacts of future gas shortages. However, based on recent price trends and the sales strategies of these companies, the overall price of urea is expected to continue to decline slightly. 　　The reasons for the recent reduction in urea production: On one hand, the overall market trend is relatively poor, with fierce price competition; some companies with higher production costs face significant pressure, and are unwilling to engage in further price wars. Due to their high operating costs, some of these companies can only temporarily suspend production in order to alleviate the situation ； On the other hand, there are individual companies that have not carried out any systematic maintenance on their equipment since the beginning of the year; in order to ensure the proper operation of this equipment and to prepare for the winter storage market ahead, they are now carrying out temporary maintenance work. Given events such as the National Day military parade in October, it is expected that the overall supply of urea may see further reductions around mid-September. 　　However, the reduction in urea supply this time has not injected significant momentum into the currently sluggish urea market. Price competition among companies remains relatively fierce, mainly due to weak demand from the market. After the completion of international export orders, no new orders have followed, and with international prices falling, companies are less inclined to export. On the domestic front, demand in many local markets has declined, leaving compound fertilizer manufacturers with an ample supply of raw materials available for use. Additionally, there are negative developments such as complete production stops in some regions, further contributing to low demand for urea. Even with a slight reduction in supply at present, pressure remains. 　　In summary, demand for urea in the current market is relatively weak, and demand in the Xinjiang region is particularly low. It is likely that the export price will drop below 1300 yuan before long; at that point, urea prices in regions such as the southwest and northwest will continue to be affected negatively. As a result, the trend of low prices for urea in areas like Inner Mongolia and Shanxi is not expected to be optimistic, and it is unlikely that there will be any significant increase in the urea market before mid-September. (Wu Wenchao)