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Raw material prices are falling – is it justified to keep the price of compound fertilizers high? Author/Source: China Fertilizer Network Date: 2019-09-10 Clicks: 17 As the saying goes, it’s a good time for business in September and October. However, even as we enter September, the market for fertilizers remains sluggish; the prices of nitrogen, phosphorus, and potassium raw materials continue to decline. In contrast, the prices of compound fertilizers remain relatively stable. Is this driven by market demand or due to insufficient production? Is it due to a shortage of supply or consideration for previous shipping orders? Recently, affected by previous orders at low prices and the upcoming tenders in India, urea prices in Shandong have risen slightly. Prices of urea in the Two Rivers region remain stable. Currently, the mainstream ex-factory price for small-grain urea in Shandong is around 1780–1810 yuan per ton. Although there is not much demand for new orders, the expectation of reduced production in the future contributes to relative stability in urea prices in the short term. The market for monoammonium phosphate remains weak during the off-season; there are few new orders from manufacturers in Hubei, and inventory pressures continue to increase, leading to a gradual decline in prices. Currently, the average ex-factory price for 55% powdered monoammonium phosphate in Hubei is between 1990 and 2050 yuan per ton, while in the southwest region, it is between 1900 and 1950 yuan per ton. The ex-plant price of 55% ammonium sulfate produced by large manufacturers in Sichuan has dropped to 1,900 yuan per ton; however, this price figure doesn’t carry much significance as deals are negotiated on a case-by-case basis. There is still room for further declines in the price of ammonium sulfate in the future. Recently, the potassium chloride market at ports has become much quieter. On the one hand, there are no attempts to drive up prices, as inventory levels at the ports are very high, reaching 3.1–3.2 million tons; moreover, the decline in the price of potassium produced in Qinghai has also had an impact on the market. On the other hand, reducing prices doesn’t make much sense, as demand is already weak, leaving no reason for any promotional efforts. At present, most in the industry lack confidence in the future market and prefer to wait and see. In the Hebei region, the operation rate of the potassium sulfate industry in Manheim is around 70%; taking into account companies that have been shut down for long periods, the actual operation rate is about 92%. It is said that this operation rate may decline in September due to environmental regulations, but as of now, there are no confirmed reports on this ； The market conditions are not ideal, mainly due to weak demand. Currently, the standard factory price for 52% fully water-soluble powder is 3,000 yuan per ton; typical transaction prices are around 2,950 yuan per ton. There is also an increasing number of cases where large orders are sold at a lower price of 2,900 yuan per ton ； The by-product hydrochloric acid is sold at a loss of around 150 yuan per ton, posing considerable pressure. Overall, the market conditions for nitrogen, phosphorus, and potassium raw materials remain unfavorable. Although urea prices are relatively stable, the price of monoammonium compounds has dropped significantly, and demand for potash fertilizers is also low. As a result, these raw materials remain weak in terms of supply, which in turn results in limited support for the pricing of compound fertilizers from a cost perspective. However, since the start of the autumn fertilizer market season, the prices of compound fertilizers have remained almost unchanged. Most compound fertilizer manufacturers have not adjusted their prices since the initial setting, with only a very few offering slight discounts. The main reason for this is that the orders placed earlier are currently in the process of being shipped; adjusting prices at this stage is not beneficial for fulfilling the earlier orders, acquiring new orders, or maintaining stable costs for the companies. Therefore, no matter how low the prices of raw materials become, these companies will stick to their prices throughout the shipment period for autumn fertilizers. (Yang Xiaomei)