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The Price Changes of Urea Are Alarming; Ammonium Chloride Continues to Lose Ground Author/Source: China Fertilizer Network Date: 11-11-2019 Clicks: 93 By mid-November, the prices of various raw material fertilizers in China had also started to drop, much like a heartbeat, which has drawn the attention of those in the industry. Their focus is on the “Phosphorus and Compound Fertilizer Conference” that is set to be held in Qingdao”； In this market, there are two opposing viewpoints: one is that it can revive the sluggish raw material markets, while the other holds that it provides insufficient support for the trend of raw material fertilizer prices. However, both scenarios remain uncertain. Currently, the domestic urea market remains weak. Even under the influence of environmental regulations or production curbs implemented during peak periods, as well as news regarding Indian tenders, no changes have occurred in the urea market. This is, of course, due to sluggish demand. Under such circumstances, any price adjustments would carry significant risks. Looking again at the situation since mid-to-late September, the domestic ammonium chloride market has also inexplicably entered a price war; to date, factories have continued to suffer losses. At present, companies are still forced to implement guaranteed-price policies, with prices in some areas continuing to decline slightly ； Currently, the mainstream ex-plant price for wet ammonium in the East China region is around 420–450 yuan per ton. The flow of dry ammonium supplies at Bayuquan Port is slow, with some delivery prices at around 560–570 yuan per ton. In the Southwest region, the reference price for certain dry ammonium supplies for export is only around 330–370 yuan per ton. For detailed prices in other regions, please join the member area of China Fertilizer Network, where you can also get information on future market trends. The overall industry utilization rate in the caustic soda sector remains high and continues to rise. At present, aside from a few ammonium chloride manufacturers in Tianjin and Jiangsu that have low production levels or have ceased operations, the rest of the plants are operating at 70-80% capacity; some large factories are even producing beyond their capacity. According to statistics from China Fertilizer Network, as of now the overall operational rate of companies in the caustic soda industry is 78.08%. Moreover, an ammonium chloride production facility in Dalian, in the Northeast, is also set to start producing qualified products, which suggests that the operational rate of these companies should increase further ； It is also important to note the inventory of ammonium chloride that various companies still need to process. However, “when all the negative factors have been factored in, they turn into positive ones.” Given the relatively high inventory levels and high operating rates among ammonium chloride producers, it’s possible that some companies may voluntarily reduce their production rates or even temporarily halt production. This would certainly provide much-needed relief to the currently sluggish market conditions ； Furthermore, with the soda ash market operating in a weak condition and prices on the decline, companies’ production costs will be under threat; this poses a particularly difficult challenge for those using traditional manufacturing methods. As a result, some companies may reduce their production levels, try to maintain higher prices, or slow down the pace of price cuts. New orders for ammonium chloride remain weak, and the expansion of inventory levels keeps getting postponed. If there’s one culprit for the sluggish ammonium chloride market, it’s undoubtedly demand. First, the overall industry utilization rate of compound fertilizer manufacturers is only 38.01%; sales are poor, there is little enthusiasm for production, and the amount of raw materials purchased is low ； Secondly, some small and medium-sized compound fertilizer manufacturers are operating at reduced capacity due to heavy environmental regulations, and some have ceased production because of high cost pressures ； Furthermore, some companies that produce compound fertilizers and extruded ammonium chloride particles are waiting for clearer prices and policies following the phosphorus compound fertilizer meeting; as a result, demand remains low for now. In the end, the urea market remained weak with prices continuing to fall; large and medium-sized traders purchased as needed, while small-scale farmers had products available but no market to sell them in. This situation further impacted the already low prices of ammonium chloride ； However, it is not impossible for urea to see a turnaround; factors such as the speculation surrounding the recent news regarding pricing, or upcoming gas restrictions, could lead to a stabilization or even an increase in urea prices in certain areas. If this happens, it will be beneficial for ammonium chloride, whereas otherwise it will have a negative impact. In summary, ammonium chloride manufacturers are operating at high levels, there is inventory pressure, demand is weak, and prices can only remain at a minimum level – all of these are clear negative factors ； Factors such as the reduced inventory levels and developments following the meetings on phosphate fertilizers have created some expectations regarding raw materials. However, given the current situation, it is unlikely that ammonium chloride prices will improve anytime soon; they will remain low. It is possible that some parties will continue to offer low prices in an effort to secure orders ； Then, hope can only be left to time and demand to prove it. (Tan Junying)