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Sulfur-based fertilizers: firing the first shot for winter storage! Author/Source: China Fertilizer Network Date: 2019-10-28 Clicks: 7 At the turn of autumn and winter, the fertilizer market entered a \"freeze period\". As the autumn fertilizer markets in various regions gradually close, calls for the start of winter stockpiling are increasing, though they have not yet met market expectations. As the most important production and sales period of the year, winter stockpiling is often seen as a key factor. To date, the market situation for compound fertilizers in this winter’s low-stock scenario remains uncertain; there are no established pricing levels or pre-payment policies, and the market is stuck in a state of stagnation. The longer the market remains stuck, the more sluggish the atmosphere becomes. Although the overall winter storage market situation is not yet clear, some companies are already getting ready by tentatively setting advance prices for compound fertilizers, with the aim of making outright purchases. It is understood that the upfront purchase price for most 45% sulfur-based (12-18-15)/(13-17-15) compound fertilizers is around 2,150 yuan per ton, which represents a decrease of nearly 200 yuan per ton compared to the same period last year. Such a low price has indeed piqued the interest of buyers in the downstream market. As the first steps toward winter stockpiling are taken, it’s inevitable that questions arise: why has the price dropped so sharply? Firstly, costs are low. When it comes to the price of compound fertilizers, the cost of raw materials must be taken into consideration. Currently, the cost of the pure raw materials for 45% sulfur-based general-purpose compound fertilizers is around 1,950 yuan per ton. When other costs are taken into account, this amount is exactly equal to the purchase price for winter storage at present. It is evident that low raw material costs have directly led to a decrease in the prices for winter storage. Recently, the prices of nitrogen, phosphorus, and potassium have been on a downward trend, with little chance of an upward reversal in the short term. In particular, the urea market in China has not seen any improvement due to external factors, and prices in many areas are approaching their lowest levels ； Yi’an Ammonium continues to perform poorly; persistent weak demand is putting pressure on the factories ； Port inventories of potassium chloride continue to reach new highs, and prices remain under downward pressure; as a result, the cost of raw materials for compound fertilizers is likely to fall further in the future. Secondly, diammonium is weak. If we are talking about the fertilizer type that has seen the biggest price drop from autumn to date compared with the same period in previous years, diammonium phosphate is the most appropriate example. Recently, it was reported that the average ex-factory price of 64% diammonium phosphate in Hubei Province is 2300 yuan per ton or even less, which is 300-400 yuan per ton lower than the price level during the same period last year. Such a significant decline is even more fatal for compound fertilizers, especially when the market conditions are already weak. As alternatives to one another, low-cost diammonium fertilizers are being favored by more market participants at present. Although the price of compound fertilizers is falling, the degree of this decline is far less than that of diammonium fertilizers. There is still some expectation on the part of end-users regarding further drops in the price of compound fertilizers; the weaker the market for diammonium fertilizers, the greater the pressure on the prices of compound fertilizers. Finally, demand is low. Apart from raw material costs, downstream demand is also a crucial factor influencing the prices of compound fertilizers. It is precisely this weak demand that has led to a continuous decline in the market for compound fertilizers over the past few quarters, with prices repeatedly hitting the lowest levels seen in the same periods in previous years. One reason for this is the decreasing investment in agriculture; high costs and low profits have prompted many farmers to treat traditional farming as a secondary occupation, resulting in an increase in abandoned farmland, and even a sharp drop in fertilizer demand in some areas ； The second reason is that various types of fertilizers are abundant in the market; especially compound fertilizers, whose supply far exceeds demand. Price wars are rampant, which directly results in downstream demand not being able to be concentrated or fully realized. In summary, sulfur-based compound fertilizers kicked off the winter storage period at an unexpectedly low price; the actual winter storage campaign has just begun. Based on future trends in raw material availability and supply and demand, it is initially estimated that there is still room for further declines in the prices of compound fertilizers. (Feng Hongyang)