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Labeling: Urea’s Last ‘Cover’ Author/Source: China Fertilizer Network Date: 2019-09-18 Clicks: 8 On the evening of September 6, India’s MMTC company issued another tender for the import of urea; the bidding deadline was September 13, with shipment scheduled for October 16. The results of the recent bidding process have been announced, and it is estimated that the total volume of urea that will be supplied to the east and west coasts, along with the urea delivered directly from the Middle East, will be around 805,000 tons. The lowest bid prices are 278 dollars per ton (FOB) and 276.06 dollars per ton (FOB), respectively. The sources of this urea come mainly from the Middle East, the Black Sea region, and China; however, the exact amount of urea supplied from China remains uncertain. Based on the current conversion rates using various underlying factors, the lowest bid price for Indian urea is equivalent to a factory outlet price of around 1,700 yuan per ton in factories in Shandong and other regions; this is about 100 yuan per ton lower than the domestic sales price. Given that the operating rates of domestic urea factories remain stable at high levels at present, and the environmental restrictions during National Day are not clear, the domestic urea market is likely to continue to experience slight declines in the short term. As the last ‘cover’ for the urea market, it seems that the tenders in India have not brought much hope to the domestic urea market at present. The finished fertilizers that were previously used as a means to boost the market by taking advantage of the favorable conditions for urea have now encountered difficulties. Taking compound fertilizers as an example, the market situation for them has indeed improved in many regions recently; both corporate shipments and distributor deliveries are proceeding more smoothly than before. However, this improvement still reflects the lag seen in the previous quarters ； Compared to compound fertilizers, influenced by other raw materials as well as supply and demand factors, the market for water-soluble fertilizers may have a brighter future. Firstly, the raw materials are favorable. Although the price of urea does not look promising in the future, potassium dihydrogen phosphate, which is also one of the key raw materials for water-soluble fertilizers, has seen its price rise again. Companies are inclined to increase prices, mainly due to environmental inspections; the supply of yellow phosphorus, a raw material for this substance, is tight, resulting in higher prices. The reason why water-soluble fertilizers are more expensive than traditional fertilizers is partly due to higher raw material costs; the elevated price of potassium dihydrogen phosphate directly encourages water-soluble fertilizer manufacturers to increase prices ； Furthermore, other water-soluble fertilizer raw materials remain relatively stable, such as industrial monoammonium and other water-soluble substances; as a result, the cost of these raw materials has not decreased but instead increased, which has boosted market sentiment during the autumn and winter seasons. Secondly, there are favorable demand factors. While raw material costs are important, short-term market demand is of utmost importance. Autumn and winter are the periods when fruit and vegetable cultivation is concentrated in many areas, resulting in a high demand for new types of fertilizers, especially water-soluble fertilizers. One reason for this is that, influenced by policy initiatives in recent years, there has been a significant shift in the cropping structure in various regions, with traditional field crops gradually being replaced by cash crops ； The second reason is that the price levels of traditional field crops remain low, and natural disasters occur frequently, leading to losses or reduced yields on a regular basis. As the area dedicated to growing cash crops increases, it boosts local incomes; at the same time, local communities invest more in agriculture, which in turn increases the demand for water-soluble fertilizers. Finally, there are positive supply factors. As National Day approaches, there are numerous reports of another wave of shutdowns and production restrictions in the chemical industry. It remains unclear what the production situation will be like for fertilizer manufacturers during this period. However, recent days have seen a series of inspections related to environmental protection and safety in various regions; there are even rumors that in some areas, all chemical (hazardous chemicals) manufacturing enterprises are required to refrain from starting up or shutting down their operations, from carrying out maintenance work during this time, and from conducting any welding activities. Enterprises that are already shut down are not allowed to resume production. If compound fertilizer manufacturers are also affected, it could lead to temporary shortages or even complete outages of these products in the market. In summary, rising raw material costs, the arrival of the fertilization season, and localized supply shortages will all act as positive factors driving the growth of the water-soluble fertilizer market in the future. It is expected that the water-soluble fertilizer market will remain stable throughout the autumn and winter seasons. (Feng Hongyang)