Urea: Most of those that appear

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Urea: As observed by most authors/Source: China Fertilizer Network Date: 2019-09-20 Clicks: 14 Fluctuations occur whenever tenders are announced or in the market, and the same was true this time – prices rose before the tender was announced and dropped afterward. It seems to have become some kind of inexplicable “pattern” over time. According to the data, India won the bid for nearly 1 million tons of urea in this tender; 150,000 tons of this were exported from China, with two ships carrying 50,000 tons each originating from China, while the origin of the remaining amount is still unknown； Putting the price aside, even just in terms of quantity, it won’t provide much support to the domestic market. It is now certain that the domestic urea market is weakening, with prices falling to varying degrees. For example, the purchase price of urea by compound fertilizer manufacturers in Linyi, Shandong, has dropped from 1,890–1,900 yuan per ton before the festival to 1,830 yuan per ton. Those interested in knowing the detailed prices of other manufacturers are welcome to join the member area of China Fertilizer Network. 　　Urea production facilities are operating at a high level; according to China Fertilizer Network, this rate is around 56.5%. The number of orders awaiting fulfillment by these companies is gradually decreasing, resulting in weaker support for the industry ； Large traders will certainly not build up reserves at this time: first, they prefer to buy when prices are rising rather than falling; second, it is a sensible approach to purchase as needed; third, the profits for end-users have been poor overall this year, which has reduced their enthusiasm for stockpiling fertilizers. In some areas, it is necessary to closely monitor the prices of grains, vegetables, and fruits before making any decisions ； The same is true in the industrial sector: operations are restricted due to environmental, safety, or other factors, and the procurement of raw materials progresses slowly. Why do most markets view the trend of urea in a certain way? 　　With an asymmetry between supply and demand, and tensions intensifying, market pressure remains high. Looking at the supply side, there is an obvious surplus. According to statistics from China Fertilizer Network, China’s daily urea production volume currently stands at 158,600 tons, and a few urea production plants in Shaanxi that were under maintenance are set to resume operations soon ； With regular environmental and safety inspections, the operation of urea production plants remains at a normal level ； It is not yet clear whether corresponding measures will be taken during the National Day holiday to require urea manufacturers to limit or suspend production; however, as of now, the operations of these manufacturers have not been affected ； Another factor of expectation is the support provided by liquid ammonia; currently, prices of liquid ammonia have seen a moderate rebound in some areas. If urea prices fall too much, some companies are likely to temporarily shift their production focus to liquid ammonia, thereby reducing the pressure on urea shipments. Although there are some positive aspects in terms of supply, it still provides very little support. As for the weak demand, it is due to the off-season in agriculture; sales are slow, and businesses in this sector generally report low sales volumes. Major agrochemical suppliers have repeatedly stated that they will purchase goods only as needed and sell them as they arrive. They also show resistance to any speculation related to urea” ； This year, due to weather conditions, crops and cash crops in both the north and south have been affected, resulting in poor harvests and expected declines in revenues; as a result, there is little incentive to stock up in local markets ； It is also worth mentioning the use of new types of fertilizers in certain regions such as Gansu and Inner Mongolia, which will gradually put pressure on traditional fertilizers ； Secondly, the industrial demand is even more disheartening for the industry; plywood factories have long had to operate at reduced capacity due to environmental inspections, resulting in lower purchases of the raw material urea ； Although overall production in the compound fertilizer industry has seen a slow recovery, it remains at just slightly above 50% levels. Due to ongoing environmental and safety inspections, further improvement is difficult. Additionally, market feedback indicates that compound fertilizer companies have large inventories, and some small and medium-sized enterprises lack enthusiasm for production; in order to reduce cost pressures, they opt to cut production or even stop operating, resulting in limited purchases of raw materials. 　　This printing announcement is once again more hype than substance. Before the bidding process, urea prices were rising, but they started to fall after the bidding concluded. There is no significant support for prices and volumes in our country. To date, India’s total procurement volume is nearly 1 million tons; 150,000 tons were re-exported from China, with two ships carrying 50,000 tons each of Chinese origin; the rest remains unknown. The CIF prices on India’s east and west coasts are 278 dollars per ton and 276.06 dollars per ton respectively, and neither the volume nor the prices provide any support for exports from our country. 　　Overall, the utilization rate in the urea market is high, and factories generally have no inclination to reduce production capacity on their own, so the pressure to ship goods is unlikely to ease in the short term ； Whether it is the weak demand in domestic industry and agriculture, a cautious attitude on the part of stakeholders, or the fact that this tender offer does not hold any advantages, the various speculative voices are gradually subsiding. It is expected that, given the imbalance between supply and demand, downstream users will still clearly view urea as carrying significant operational risks, which seems to be the prevailing view. 　　(Tan Junying)