It rises and falls – when will urea truly bottom out and start to rise again?

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It rises and falls – when will urea truly bottom out and start to rise again? Author/Source: China Fertilizer Network Date: 2019-09-10 Clicks: 20 The price of urea has been experiencing fluctuations recently, with very rapid changes in its value. At the end of August, urea prices in Shandong Province saw a rebound from low levels; however, at the beginning of September, prices dropped again in some areas. The market situation is quite complex. So, when is the best time to stock up on urea this year? What is the actual impact of the environmental production restrictions in September? 　　Firstly, there is little demand for autumn fertilizers in agriculture later on. When the demand for autumn fertilizers starts in August, while downstream users stock up on fertilizers for autumn wheat cultivation, some urea is already reserved. Actual use of fertilizers will occur after November, and there is little room for additional purchases later on; after all, due to low grain prices, downstream users prefer to use ammonium chloride, sulfuric ammonia, and certain formulated fertilizers as alternatives to urea. Considering cost-effectiveness, there is not much demand in the agricultural sector in September. 　　Secondly, in the industrial sector, the focus is mainly on compound fertilizer manufacturers and plywood factories. Recently, due to the poor performance of real estate companies, sales for plywood manufacturers have been weak, and demand for urea is also low. Similarly, this year compound fertilizer manufacturers are also facing a tough situation; they are very cautious about purchasing raw materials. In particular, urea is purchased only as needed. The demand for compound fertilizers in autumn has already reached more than half of its annual level, and demand will be low in the coming period as we enter the off-season period marked by the transition between autumn and winter. Therefore, there are no plans to make large-scale purchases of raw materials in early September. Although driven by demand from previous orders, the operating rate of compound fertilizer manufacturers has risen to 50%, but most of the urea raw materials required earlier have already been purchased, so there is currently no shortage of such materials. 　　Once again, the international situation is not optimistic. There are rumors that India will issue new tenders in mid-September. However, due to recent fluctuations in exchange rates with the RMB showing signs of appreciation, the progress of these Indian tenders might be slower. Even if they do come as scheduled, the expected prices will not be very high. Moreover, a considerable amount of urea has already been purchased through previous tenders, so in reality these Indian tenders will have little impact on boosting urea demand. 　　Finally, with the arrival of environmental protection measures in September, some believe that the operation of urea production facilities might be affected later on. However, according to research conducted by China Fertilizer Network, after mid-September, some enterprises that were undergoing maintenance in regions such as Shaanxi, Inner Mongolia, and Xinjiang will gradually resume production, leading to a rapid increase in operational rates and an increase in daily output. As a result, it is unlikely that there will be a shortage of supply and thus rising prices. 　　So, back to the topic: when will urea prices bottom out and start to rise again? Around the middle to late part of September, once the operating rate of urea production increases significantly while demand remains low, urea prices could reach a bottom. It is not until winter arrives and natural gas supply decreases along with the start of heating, causing coal prices to rise, that urea prices are likely to see a real rebound. If there is any part of our analysis and market data that you would like to know more about, you can call the consultation hotline at 0451-88001128. (Yang Xiaomei)