The pitfalls of urea – we’ve all fallen for them

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The Pitfalls of Urea: Everyone Has Fallen Into Them Author/Source: China Fertilizer Network Date: 2019-09-06 Clicks: 7 From September to the beginning of October, the topic of \"the golden September and silver October\" seems to have lost some prominence, with attention shifting instead to the production restrictions imposed on various fertilizer and chemical companies during the environmental protection efforts or the National Day holiday； Domestic urea producers seem to be discussing the possibility of restricting production or even shutting down operations. Coupled with favorable international market conditions, prices have seen a slight rebound recently. However, traders remain cautious, and large agrochemical suppliers have not made excessive stockpiles. Wholesale markets at the grassroots level purchase urea as needed, and most people remain pessimistic about its long-term trend. Some people also said that the \"traps\" encountered on the urea route are ones that everyone has run into. Well, although this rebound in urea prices hasn’t caused much of a stir, its future trend remains a focus of attention within the industry. 　　Currently, the mainstream ex-factory price of urea in Hebei region has risen slightly to around 1770–1820 yuan per ton. In Shandong region, prices fluctuate; the mainstream ex-factory price is around 1780–1810 yuan per ton, indicating a lack of upward momentum. In Hunan region, although the wholesale price of urea has risen slightly to around 1900–1930 yuan per ton, traders are pessimistic and prefer to purchase as needed, acting cautiously ； For detailed prices in other regions, please join the member area of China Fertilizer Network. 　　The problems with urea are not just limited to prices dropping before the goods have even been delivered; it’s also not only the sudden fluctuations in prices that catch people off guard... The industry complains that there are too many issues related to urea. 　　Supply and demand remain in a state of conflict. Some urea production plants in Inner Mongolia, Shaanxi, and Henan that were under maintenance have resumed operations. The overall operational rate of urea production plants in China has risen rapidly; according to data from Zhongfei Net, it is currently around 60.21%, with a daily production volume of about 151,100 tons, an increase compared to last week ； Furthermore, the liquid ammonia markets in parts of North China, East China, and Central China are operating weakly with low prices; a few companies still prefer to focus their production on urea, which thus increases the sales pressure on urea ； Another issue of great concern in the industry is environmental protection measures and the production restrictions imposed on fertilizer manufacturers during the National Day holiday. As of now, environmental inspections have not been eased, and the overall operational rate of urea manufacturing companies remains around 60%. The extent of the impact is already clear to industry insiders. Additionally, there is the issue of production restrictions during the National Day holiday; nearby companies will inevitably be affected. However, compared to downstream enterprises, urea manufacturers should experience a relatively limited impact on their operations. This means that unless factories voluntarily reduce their production levels, the operational rates of urea manufacturers will not drop to extremely low levels. 　　The needs of both workers and peasants are not yet satisfactory. Firstly, demand in the agricultural sector is weak; wholesale prices in the market have risen slightly along with the export prices set by factories, but sales performance remains average. It’s possible that a decline is imminent. Large agrochemical suppliers remain cautious and are not inclined to stock up, opting instead to purchase only as needed. As for the retail market, there is little enthusiasm for purchasing. Secondly, industrial demand is weak; due to environmental inspection restrictions, plywood factories are constrained in their production, resulting in a significant drop in operational capacity. In addition, some compound fertilizer manufacturers have also seen a reduction in their production rates as a result of environmental or safety inspections, which has led to a noticeable decrease in their purchases of urea as raw material. Finally, as the National Day on November 1st approaches, the operations of related fertilizer and chemical companies will be restricted; as a result, the production capacity of some compound fertilizer manufacturers and plywood factories will decrease again, leading to a decline in demand for urea. 　　The international market is still sufficient for urea manufacturers to use for speculation. Since last week, Ethiopia, Bangladesh, and now Nepal have issued various numbers of tenders, and there is also anticipation regarding when tenders will be issued in India – although the timing is still unknown. These factors serve as a boost for the domestic urea market. 　　Could the continuous decline in ammonium chloride prices be the final straw that brings down urea prices? Currently, the domestic ammonium chloride market is weak, with very few new orders; end-users are waiting to see what will happen. Some traders are selling their stock, and companies are forced to lower prices in order to attract customers. However, this situation will surely draw the attention of some compound fertilizer manufacturers, who may opt to use ammonium chloride instead of urea, thereby further weakening the urea market. 　　In summary, the supply and demand imbalance in China’s urea market is evident; relying solely on international factors that lack a solid foundation, or on price increases due to reduced production in the short term, cannot sustain such a situation for long. To avoid falling into similar pitfalls again, it is still the best approach to purchase urea as needed. 　　 　　(Tan Junying)