Urea prices rise in an unconventional way; ammonium chloride prices drop to avoid competition”

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Urea prices rise in an unconventional manner; ammonium chloride prices fall to avoid competition. Author/Source: China Fertilizer Network. Date: 2019-09-10. Clicks: 19. Among various nitrogen, phosphorus, and potassium fertilizers available today, only urea has seen its price rise, standing out in the industry. However, considering the actual production levels of urea manufacturers and the consistent demand from end-users who purchase urea as needed, there is no solid reason for continued price increases. Yet urea manufacturers still choose to pursue this unconventional strategy. Ammonium chloride has also long lost its edge from when its price rose. Of course, rising urea prices are beneficial for ammonium chloride, yet ammonium chloride has not yet perceived this support from urea. Due to supply and demand imbalances within its own industry, ammonium chloride is continuing to see its prices drop in order to avoid the negative effects, or perhaps it is waiting to make a comeback someday; but that’s something for another time. For now, let’s take a look at the current situation in the ammonium chloride market. Currently, the domestic ammonium chloride market remains weak, putting pressure on manufacturers to sell their products; prices have dropped significantly in many areas. This week, the drop has been around 30–50 yuan per ton. Additionally, some companies offer prices that are negotiable on a case-by-case basis, and there are also orders from various factories that require lower prices for delivery ； According to information from the market, the average price of dry ammonium at factories in the Central China region is around 700–720 yuan per ton. In the Northeast region, winter storage has not yet begun, and there is still some inventory of agricultural supplies that needs to be sold first; as a result, the progress of winter storage is slow. However, due to an accidental incident that occurred during the restart of a ammonium chloride production facility in the Northeast recently, the resumption of operations has been delayed. This has led industry experts to speculate that there might be signs of an acceleration in winter storage activities, or that prices could see adjustments. It is unlikely that there will be a significant reduction in the operation of ammonium chloride enterprises in the short term. At present, an ammonium chloride plant in Huainan that was under maintenance has resumed production; another ammonium chloride plant in Jiangsu, which was operating at reduced capacity for maintenance, has also resumed operations, resulting in an increase in daily supply by 500 tons. Meanwhile, some units at a large plant in Henan are under maintenance, leading to a decrease in daily supply by 3,000 tons. According to statistics from China Fertilizer Network, the overall operational rate of the caustic soda industry as of now has dropped to 74.3%, although this is still considered a high level ； Additionally, the ammonium chloride manufacturers that were scheduled for maintenance in September may cancel those plans or carry out only short-term maintenance. However, given the concerns surrounding the National Day holiday, these companies might reduce production or even shut down operations; it will be necessary to monitor the situation at that time. The market for soda ash is still showing a moderate recovery. Although companies in this industry are cautious and make only slight price increases, manufacturers’ attention has indeed shifted toward soda ash in recent times, with ammonium chloride taking a backseat. This means that as soda ash production increases, so too will that of ammonium chloride. It is expected that the overall operational rate of companies involved in the production of soda ash and ammonium chloride in September will not be below 70%, and it’s even possible that it could reach nearly 80%. Weak demand is the “culprit” behind price cuts. The operating rate of compound fertilizer manufacturers is slowly recovering, yet due to poor profitability, there is little enthusiasm for production. Although raw material stocks are limited, high costs mean that some companies have simply stopped operations ； Some other companies have reduced their production due to the impact of environmental and safety inspections, which in turn results in limited purchases of raw materials ； Coupled with the just-in-time purchasing approach, sales of ammonium chloride progressed slowly despite operating at high levels. Additionally, winter stockpiling has not yet begun in the Northeast region, and supply sources from various places are also eyeing the Northeast market ； During the November period, some ammonium chloride production plants that use extrusion granulation methods, as well as compound fertilizer factories, will inevitably be affected; as a result, the demand for ammonium chloride will show a downward trend at that time. The effect of urea varies. Recently, the price of urea has seen a sudden rebound, catching downstream manufacturers off guard; they have also raised their prices, though the increase has been limited for now. The support from international market conditions is somewhat weak. In China, there is an excess of supply and a shortage of demand, so it is unlikely that the upward trend in prices will persist for long, which means that the support for ammonium chloride will also be limited. In summary, the increase in urea prices at this time represents a risky strategy; as for ammonium chloride, it has no choice but to see its prices drop. In the short term, the ammonium chloride market still lacks solid support, and some companies will inevitably lower their prices in order to attract customers. It is best to act cautiously, avoiding confrontation for now before preparing to take action later. (Tan Junying)