The reasons for the price increase of urea during this off-season

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Reasons for the price increase of urea during this off-season period / Author/Source: China Fertilizer Network / Date: 2019-09-10 / Clicks: 20. At the beginning of September, ahead of the peak season for fertilizer use in autumn, demand for nitrogen-based fertilizers was relatively moderate. However, recently, many regions where urea is produced have shown a tendency to raise prices; some companies have even started to increase their pricing. Currently, the typical ex-factory price of urea in Shandong is 1770–1820 yuan per ton. In Linyi, compound fertilizer manufacturers are offering a purchase price of 1820–1830 yuan per ton for urea. In Hebei, the typical ex-factory price is 1770–1820 yuan per ton, while in Henan it is 1780–1790 yuan per ton. In Shanxi, the typical ex-factory price is 1700–1710 yuan per ton, with large-grained urea costing 1710 yuan per ton； Some companies have even suspended taking orders, while certain enterprises in Xinjiang say they plan to raise their prices as well. The trend of rising prices in the market is intensifying; despite relatively low demand for urea, prices are still increasing. According to industry experts, the factors behind these price increases are as follows: First, a large number of transactions were made at low prices in the main production areas earlier on. Within this week, some large manufacturers in Shandong have completed sales of over 60,000 tons at low prices. In regions such as Shanxi and Inner Mongolia, there is also a relatively large number of orders awaiting shipment at low prices. As a result, companies face tight supplies of spot goods, with relatively less supply pressure; this has led to an increase in overall prices. On the one hand, this is done to control new orders, and on the other hand, it serves to support traders who purchased urea earlier. Based on the current number of orders awaiting shipment, there are no signs of a decline in factory quotes in the short term. Secondly, the overall supply may decrease. According to market reports, a new round of environmental inspections is set to begin. Although there are no specific production restriction plans yet in various regions, as the date of October 1 approaches, production restrictions may already be in effect in places such as Shanxi and Henan. In Xinjiang as well, equipment is old, and to avoid risks, maintenance plans for the facilities are underway. According to statistics from China Fertilizer Network, the current daily output of urea across the country is 151,100 tons, and there is a high possibility of further reductions in production in the future. Once again, the tender for low-stored reserves has been announced. On the morning of September 6, the companies that won the bids for the 2018/2019 fertilizer stockpiling program completed the renewal of their contracts. It is reported that the validity period for the qualifications of companies selected to undertake the task of storing fertilizers in excess of demand for the 2019/2020 period is 2 years. This renewal applies to those companies that completed their storage tasks for the 2018/2019 period and passed the relevant assessments; the total amount to be renewed is nearly 4 million tons. Following this signing, **the reform of the seasonal fertilizer reserve system will take place. Driven by the desire to drive up prices and supported by pending orders, companies tend to raise their quotes. Finally, demand from the international market is gradually increasing. Following the announcement of tenders for 100,000 tons each of large and small particles of urea in Bangladesh earlier on, some domestic companies intended to raise their bid prices or even increase them. On the evening of September 6, India issued new tenders for an unspecified quantity of large and small particles of urea; the bid prices and quantities were to be announced on September 13, with the shipping deadline set for October 16. The validity period for submitting bids is yet unknown; generally, it would be until the 20th. The Indian market is showing renewed strength, and domestic urea prices are likely to continue rising. In summary, urea prices have started to rise recently due to the factors mentioned above. However, demand in the domestic market is currently relatively weak, so it is unlikely that high prices will hold; caution is still necessary when making purchases.