Urea can’t even save itself; liquid ammonia had better watch out for itself

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Urea itself is in trouble; liquid ammonia must fend for itself. Author/Source: China Fertilizer Network. Date: October 25, 2019. Views: 7. Currently, the overall domestic fertilizer market is sluggish, and most market participants hold pessimistic expectations regarding various types of fertilizers. Among them, the market for nitrogen fertilizer urea has performed beyond expectations: factories have continuously lowered prices, yet trading remains sluggish. In the agricultural market, there are prices but no buyers at the wholesale level, while industrial demand provides limited support. This has led to a surplus in urea supply. It seems that unless urea producers proactively cut their production levels, there is little chance of any improvement in the situation. It seems that urea itself is in a precarious situation; all we can do is hope for a slight price increase in certain areas. As for liquid ammonia, which is generally experiencing weak demand, it’s on its own now. 　　Urea prices across various regions have declined to varying degrees. Lacking any positive factors to support them, urea prices seem to change daily. Currently, the prevailing ex-works prices for urea in Hebei Province are around 1,720–1,780 yuan per ton; discounts may be offered during transactions. The prevailing spot exchange rate-based ex-works reference price for liquid ammonia is approximately 2,700–2,850 yuan per ton. In Shandong Province, the main ex-works prices for urea range from 1,690–1,720 yuan per ton; following a slight increase, the ex-works reference price for liquid ammonia stands at only about 2,550–2,850 yuan per ton. For detailed price information in other regions, please join the member area of China Fertilizer Network ； Based on a rough calculation using the ratio of liquid ammonia to urea at (0.58–0.6):1, if production is prioritized toward urea, then taking Hebei as an example: with the average cash ex-works price of liquid ammonia at 2,750 yuan per ton, the price of urea should be in the range of 1,795–1,850 yuan per ton. Currently, however, the urea price stands at only 1,720–1,780 yuan per ton. Therefore, urea and liquid ammonia must operate independently of each other. Moving forward, the trend of the liquid ammonia market has become a focal point of attention within the industry. 　　It is difficult for the supply volume of liquid ammonia enterprises to decrease significantly. Currently, judging from the operating rates of liquid ammonia producers, the staggered production cuts in Shanxi Province and the restrictions imposed on certain liquid ammonia enterprises due to the Military World Games in Wuhan, Hubei, are actually beneficial for these companies at present ； Meanwhile, the operating rates of the remaining ammonia producers remain at high levels. Moving forward, a major ammonia plant in Hubei Province that is currently under maintenance will resume operations. Another plant is also scheduled for maintenance. Early next month, a plant in Anhui Province plans to begin its annual maintenance period. Additionally, yet another plant has announced that its upgraded facilities will be put into use gradually. As a result, the overall operating rate of ammonia producers may fluctuate somewhat; however, this will only lead to minor price fluctuations in nearby regions. For now, it won’t have any significant impact nationwide. 　　The urea market remains weak; the continuously declining prices may prompt manufacturers to shift their production focus to liquid ammonia. Based on the aforementioned interconversion between urea and liquid ammonia, in order to alleviate the pressure on urea shipments, it is economically beneficial for enterprises to shift their production focus to liquid ammonia from a standpoint of production costs and efficiency ； Additionally, the methanol market remains weak; prices in many regions have dropped by around 200 yuan per ton. As a result, companies are forced to shift their production focus to liquid ammonia. All these factors will increase the pressure on liquid ammonia shipments, making it unlikely for its price to rebound. 　　Operating rates in the ammonia industry remain low, with overall weak demand. Under the dual pressures of environmental protection and safety requirements, the operating rates of some chemical enterprises remain low. Meanwhile, the sales progress of compound fertilizer manufacturers is slow, and their enthusiasm for production is lacking. In particular, it is quite common for small and medium-sized compound fertilizer firms to suspend or reduce production; as a result, their purchases of raw material liquid ammonia are very limited ； Once again, the market for phosphate fertilizers remains weak. In Hubei Province, for instance, the overall operating rate of phosphate fertilizer producers is relatively low, putting pressure on liquid ammonia manufacturers in terms of sales. As a result, these companies can only lower their prices to maintain competitiveness or offer discounts; however, the extent of such price cuts is limited and does not necessarily reflect the overall market trend in China. However, in Shandong region, the environmental protection warning has been lifted, and downstream ammonia-consuming enterprises have resumed operations. As a result, the price of liquid ammonia has risen slightly by 50 yuan per ton in some areas. In Hubei region, the overall volume of ammonia released has decreased; moreover, some companies have announced that they will carry out maintenance work in the near future. Consequently, their prices have also been increased by 50 yuan per ton. These are among the few positive developments. 　　In summary, there is a lack of support for the urea market; it is an established fact that prices still have room to decline. This also constitutes a bearish factor for liquid ammonia ； However, in the short term, the maintenance schedules of a few liquid ammonia producers will provide some slight support to the market. Additionally, there is a possibility that the continuously declining price of liquid ammonia may hit a bottom due to cost considerations. It is expected that liquid ammonia prices will remain at low levels in the near term. 　　 　　(Tan Junying)