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Boots hit the ground: Unexpected price rise in compound fertilizers? Author/Source: China Fertilizer Network Date: 2019-09-16 Clicks: 6 After the Mid-Autumn Festival, the festive atmosphere in the fertilizer market faded, and trading activities gradually resumed. Compared to previous years, the lag in the compound fertilizer market this autumn is more pronounced; downstream demand in most areas has yet to surge. Although companies were able to collect payments at low prices in the early stages, the situation has since deteriorated. To date, most market analysts predict that the remaining period of autumn will see little change, with little movement in the market. The so-called \"foot hitting the ground\" principle means that once all the negative factors have been taken into account, they turn into positives. All the factors unfavorable to the compound fertilizer market have already become clear: the continuous decline in raw material costs, the persistent weakness in demand from end-users, and the abundance of products available at low prices – all of these constitute obstacles for the compound fertilizer market. As the market develops and the season approaches, the long-awaited positive factors may begin to show up after mid-September, at which point an increase in the prices of compound fertilizers is likely to occur. Firstly, there are cost advantages. Since the start of the autumn market, the costs of raw materials for compound fertilizers have shown a downward trend, mainly due to weak market conditions for nitrogen, phosphorus, and potassium. At present, there has been no significant fluctuation in raw material costs compared to before; however, the recent trend in raw material prices is likely to keep the cost of compound fertilizers stable during the second half of autumn. As a result, companies have more confidence in maintaining higher prices. The attention in the urea market is focused on the tenders in India; regardless of the winning bid prices and quantities, these will more or less influence the urea export market, thereby alleviating the situation in the domestic urea market to some extent ； There is no sign of a sharp rise in phosphorus and potassium fertilizers at the moment, nor are there any signs of a sharp drop; they are likely to remain stable at lower levels in the short term. Secondly, there are positive demand factors. The main reasons why the compound fertilizer market has remained sluggish in autumn are, in addition to weak raw material prices, insufficient demand being the biggest issue. However, as the fertilizer application season approaches, the remaining demand on the downstream side will eventually be released, and it is expected that this remaining demand will be substantial. One reason for this is that during the period when companies collected payments at low prices earlier on, various factors were not yet clear, so distributors made tentative payments and did not stock up in large quantities ； The second reason is that during the autumn season, the winter wheat production in the northern regions alone accounts for about 56% of the country’s total wheat production. This wheat is mainly grown in provinces such as Henan, Hebei, Shandong, Shaanxi, and Shanxi. Together with the planting areas in the southern provinces, it is clear that there is a considerable demand for fertilizers. Finally, there are positive supply factors. Several articles have recently claimed that in order to ensure clear skies and white clouds during the National Day holiday, all manufacturing enterprises north of the Yellow River may cease operations and reduce emissions starting from September 1. There are also reports that traffic restrictions on trucks will be implemented in some areas. To date, however, the Ministry of Ecology and Environment has not issued any official documents; yet, judging from the current environmental situation in various regions, it is likely that there will be large-scale production restrictions in the Beijing-Tianjin-Hebei area before the National Day holiday. As it is the peak season for the shipment of autumn fertilizers, production restrictions and traffic limitations will inevitably delay companies’ normal market operations. If there are short-term shortages in certain areas, price increases for compound fertilizers may occur later on. In summary, stable raw material costs, strong demand from downstream sectors, and potentially tight supply all indicate that the long-dormant compound fertilizer market is set to see a recovery in the final stages of autumn. Whether prices remain firm or sales increase, both factors will lay the foundation for winter stockpiling in the coming period. (Feng Hongyang)