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Environmental restrictions lifted: Can urea prices really rise again? Author/Source: China Fertilizer Network Date: 2019-10-28 Clicks: 8 Starting from last Saturday, the urea market experienced a significant decline; the selling price at some large factories in Shandong dropped to 1620 yuan. In Henan, the price for low-quality urea also fell below 1600 yuan, while in Shanxi, the price for low-quality urea shipped by road dropped to around 1550 yuan. The market was thus in a state of sharp decline. However, starting from this Thursday, environmental protection restrictions were lifted in areas such as Jinan in Shandong, and chemical plants there began to resume operations. Vehicles that do not meet National V standards were allowed to circulate in certain areas, which led to an increasing demand for urea in the industrial sector. Yesterday, some factories in Shandong began to signal price increases, and the prices for low-quality urea in Linyi region disappeared, with purchase prices also rising to some extent ； Although urea manufacturers have signaled price increases, some players in the industry remain cautiously pessimistic about the market outlook in the coming period, and this is reflected in the following aspects: First of all, there is still some time before the peak demand season arrives. The autumn fertilizer market has just concluded, and the compound fertilizer market is now in the early stage of preparing for winter storage. Information from downstream markets indicates that overall pre-orders for compound fertilizers this year are fairly average; some companies are producing only standard-type fertilizers. According to China Fertilizer Network, the average production rate of compound fertilizers across the country is currently less than 40%. Production of fertilizers for winter storage has not yet begun on a large scale, so there is no need to rush in purchasing urea as a raw material. On the other hand, fertilizer prices continue to decline, being about 300 yuan higher compared to the same period last year, and companies remain cautious in their approaches ； As for the agricultural market, there is no urgency to make purchases at this stage; the prices for many major types of fertilizers have not yet been determined for winter storage. For compound fertilizers and diammonium fertilizers, payments are usually made on a provisional basis, with policies regarding interest calculation remaining uncertain. In the potassium fertilizer market, large-scale domestic contracts have not been finalized, and high levels of stockpiles in ports have led downstream markets to adopt a wait-and-see attitude. The situation for winter storage this year is relatively poor, and most large traders are still choosing to wait and observe. Secondly, supply pressures remain. Reports from the southwest and Inner Mongolia regions indicate that this year’s natural gas supply will be better than in previous years. Although the price of natural gas is expected to rise, the overall supply of urea across the country is not likely to decrease significantly. According to China Fertilizer Network, the current daily production volume of urea nationwide is over 140,000 tons. Given that the market currently has only industrial demands from industries such as plate manufacturing, and although some factories still have export orders, there is still some pressure on the supply, resulting in a continued downward trend in urea prices. In summary, the lifting of environmental restrictions in regions such as Shandong can be considered a boon for the urea market. Given that demand for urea has been relatively weak recently, while production levels remain relatively high, it is expected that urea prices in some areas may see a slight increase in the near term. However, this rise in urea prices will likely be limited until the winter storage season fully gets under way. (Wu Wenchao)