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Environmental regulations are becoming stricter, and nitrogen fertilizer prices are likely to rise! Author/Source: China Fertilizer Network Date: 2019-10-12 Clicks: 7 Since the beginning of this year, the international situation has been complex; exchange rates and energy prices have fluctuated significantly due to geopolitical factors. Domestic regulations regarding safety and environmental protection have become stricter. Especially after entering the fourth quarter, as the heating season approaches in China, periods of severe air pollution become more frequent, and measures to limit production during such periods are implemented repeatedly. There are also many uncertain factors that could affect the trend of the nitrogen fertilizer market in the future. On October 10, the \"2019 Nitrogen Fertilizer Industry Marketing Conference\" was held in Zhengzhou, Henan. At the conference, experts, analysts, and leaders from the China Nitrogen Fertilizer Industry Association, independent energy pricing and analysis companies, as well as urea production and distribution enterprises, analyzed the nitrogen fertilizer production situation for 2019 from various perspectives and provided forecasts for the market trends in 2020. Wei Yong, Director of the Information and Market Department at the China Nitrogen Fertilizer Industry Association: “From January to September 2019, a total of 43.896 million tons of synthetic ammonia were produced across the country, representing a 2.9% increase compared to the previous year.” ； Nitrogen fertilizer production reached 30.562 million tons, a year-on-year increase of 5.3% ； Urea production reached 41.901 million tons, a year-on-year increase of 4.2%. According to the weekly report by the Nitrogen Fertilizer Association, the operating rate of urea production from January to September 2019 increased by 6.97 percentage points compared to the previous year, reaching 66.57% ； The average daily output increased by 1.7% year-on-year, reaching 149,700 tons. ” Against this backdrop, China’s imports of nitrogen fertilizers have declined, while exports have increased significantly. From January to August 2019, China exported 3.6 million tons of nitrogen fertilizers, a year-on-year increase of 28.7%; among these, the export volume of urea reached 2.694 million tons, with a year-on-year increase of 183.6%. Overall, from January to August 2019, the domestic nitrogen fertilizer market saw fluctuations in prices; the average price of urea was 1,893 yuan per ton, remaining roughly the same as last year ； Ammonium bicarbonate has decreased slightly compared to last year ； *Both AO acid AN and ammonium chloride experienced slight increases. At the meeting, experts made predictions regarding the nitrogen fertilizer market in the coming period, focusing on aspects such as raw material supply and international supply and demand dynamics: There will be an increase in natural gas supply. Sun Honglei, product development director at Beijing Shichuang Energy Consulting Co., Ltd., said, “The growth rate of the natural gas market slowed down during winter 2019. With the large-scale production of domestic gas and the earlier start of gas supply via the China-Russia pipeline by the end of the year, the overall supply of resources in winter in China is relatively sufficient; what’s important is to be prepared to handle extreme weather conditions.” Currently, the natural gas market is relatively stable. To avoid supply issues during winter, suppliers will continue to restrict gas supply to industrial users ahead of the heating season, in line with past practices; however, the supply price remains unchanged, staying at the annual average rate. The only difficulty lies in obtaining additional supplies. ”Sun Honglei, director of product development at Beijing Shichuang Energy Consulting Co., Ltd., analyzed that \"given the earlier timing of this year’s Spring Festival, it is expected that resource supply will become more available after the festival, resulting in an increase in resources available for chemical industry users.\" ” Excess supply of coal leads to continuous price drops Zhao Yu, Head of the Economic Operations Department of the Coal Chemicals Division at Shanxi Jincheng Anthracite Coal Industry Group Co., Ltd. At present, in China, there is an increase in coal supply, a decline in consumption, rising inventory levels, falling prices, decreasing profits, and accelerating changes. The national coal shortage was completely eliminated in 2012 ； Later on, users placed higher demands on the product’s high quality and low price. Zhao Yu, head of the Economic Operations Department at the Coal Chemicals Division of Shanxi Jincheng Smokeless Coal Mining Industry Group Co., Ltd., said that under the pressure of an economic downturn, the growth rate of coal consumption has slowed down compared to the previous year; there is insufficient support from downstream industries, and the supply-demand balance has changed, which will lead to a further decline in coal prices. International urea production capacity is surging, and the supply-demand balance is about to change Wang Ling, Senior Analyst at Argus “In 2020/21, an estimated 8.3 million tons of urea will come online internationally (excluding China).” For some time to come, Asia will remain the main region for global consumption growth, although the rate of growth is slowing down. Urea demand in Germany, France, Brazil, China, Australia, and Southeast Asia is expected to show a downward trend. In China, there is a combination of reduced production capacity and new capacity additions for nitrogen fertilizers, resulting in an overall increase in production. Changes in exchange rates may have a positive impact on China’s exports of nitrogen fertilizers. ”Wang Ling, a senior analyst at Argus, said that the overall supply-demand gap globally in the fourth quarter was not significant, leaving limited room for price increases. Forecast for China’s nitrogen fertilizer market this winter and next spring: According to Wei Yong, in terms of supply, no new production capacity will come online this winter. The 520,000-ton production capacity at Mingshui Chemical and the 800,000-ton capacity at Sanning are expected to become operational by the first half of next year, while the 1.2 million-ton capacity at Wulan is likely to be operational by the second half of next year. Policies regarding environmental protection and production restrictions have become even stricter. At the end of July, the Ministry of Environmental Protection issued the \"Guiding Opinions on Strengthening Measures to Address Severe Air Pollution and Enhancing Emergency Emission Reduction Actions.\" In September, the Ministry of Ecology and Environment released the \"Action Plan for Comprehensive Control of Air Pollution in the Beijing-Tianjin-Hebei Region and Surrounding Areas during the Autumn and Winter Periods 2019–2020 (Draft for Comment).\" This special rectification campaign will run for 6 months, starting from October 1, 2019, and will cover the \"2+26\" cities in the Beijing-Tianjin-Hebei region and its surrounding areas. Wei Yong believes that this year’s environmental protection-related production restrictions are stricter than those in last year, which will have a greater impact on enterprises’ operations. The nitrogen fertilizer market is expected to see an upward trend, with prices rising, though the extent of this increase is likely to be lower than that in the same period last year. As of October, the latest ex-plant prices for urea are 1,757 yuan per ton for small-grained urea and 1,785 yuan per ton for large-grained urea, showing an upward trend. In short, the market for chemical products remains unfavorable, and the overall profitability of the nitrogen fertilizer industry is expected to decline significantly compared to the same period last year.