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To be honest, the price of compound fertilizers is set to drop further. Author/Source: China Fertilizer Network Date: October 14, 2019 Clicks: 34. In mid-October, the autumn fertilizer market across various regions officially enters its final phase; with only a few areas where progress is slightly slower, most retail outlets will also conclude their business for the season. Overall, the compound fertilizer market has not been particularly impressive this fall; neither the price trends nor the trading atmosphere have met expectations. With the winter storage season about to begin, prices set in advance by companies and relevant policies are of great interest. Although a few companies have already released occasional quotes, the overall trend remains unclear. If one has to predict the winter storage prices for compound fertilizers in various regions, a pessimistic outlook is the only feasible one; this is also one of the key reasons why companies have been slow to determine their advance pricing. As is well known, as a substitute for compound fertilizers, the market situation of diammonium phosphate more or less influences its price trends. Unexpectedly, the price of diammonium phosphate has continued to drop since autumn; domestic demand is declining and the export market is not performing well, so there is no expectation of an improvement in the short term. Moreover, there are numerous other negative factors as well. First, cost factors. Raw material costs have always been a key factor determining the market price of compound fertilizers. Throughout the summer, compound fertilizer prices have remained relatively low, with the impact of raw material costs playing a major role in this. It is understood that as of now, across the country, the cost of pure raw materials for the 45% sulfur-based general series is around 2,010 yuan per ton, which represents a decrease of nearly 100 yuan compared to the same period last year; however, there is still potential for further declines in the short term. The urea market is characterized by fluctuations; with increasing domestic production, it is now doubtful whether upcoming pricing decisions will be able to boost prices ； The trading atmosphere in the monoammonium market remains sluggish; the low prices that have persisted throughout the autumn seem to still lack any momentum for an improvement ； Record-high inventory levels in Hong Kong, coupled with insufficient domestic demand, continue to put pressure on potassium chloride prices. Secondly, demand factors. Compared to raw material costs, demand from downstream markets is another key factor that influences the compound fertilizer industry. However, looking ahead to the autumn market, demand for compound fertilizers during the winter storage period remains uncertain. One reason for this is that fertilizers stored in winter are usually sold in the following spring, making it difficult to predict market trends at that time; as a result, there is often an awkward situation where prices rise during off-peak seasons and fall during peak seasons. To avoid risks, it is reasonable to reduce production volumes accordingly ； The second reason is the weak purchasing power in the downstream market; factors such as low prices for agricultural products and frequent natural disasters result in poor earnings for farmers. Distributors face difficulties in capital turnover and are thus forced to abandon their winter storage activities. Finally, supply factors. The compound fertilizer market is plagued by negative factors with few positives; the claim of supply shortages, which is often used for speculation, no longer holds any credibility. During the National Day holiday, some areas in Shandong, Hebei, and other regions faced significant environmental pressure, leading to temporary suspensions or restrictions on production. With the recovery of the market after the holiday period, the production levels of most enterprises have returned to normal. Together with the existing inventory from earlier periods, this is sufficient to meet current and future market demands. Although the overall operating rate of compound fertilizer manufacturers is currently only around 40%-50%, which may seem low, the reason for this is not restrictions on production but rather demand from downstream sectors. To reduce inventory pressures, enterprises are forced to lower their production volumes. In summary, a sharp drop in the price of diammonium, the lack of hope for an increase in the prices of other raw materials, and various other unfavorable factors related to supply and demand may hinder the development of the winter storage market. At present, only sporadic prices for winter storage have been announced; it is expected that as dealer meetings held by companies progress, the situation regarding winter storage will become clearer by the end of this month. If there is any part of our analysis and market data that you would like to know more about, you can call the consultation hotline at 0451-88001128. (Feng Hongyang)