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The rise in urea prices is fierce; it’s very difficult for customers with essential needs. Author/Source: China Fertilizer Network Date: 2019-12-02 Clicks: 26 This increase in urea prices came without any warning; within just one week, from November 23rd, urea prices rose by 20–80 yuan per ton in most parts of the country. The rise was rapid and sharp. What factors are driving this increase in urea prices? It’s so difficult for customers who have a constant need for urea! They feel that the basis for this price increase seems unstable and therefore don’t want to pay a high price, but at the same time they are worried that prices will keep rising, forcing them to go ahead and purchase the goods anyway. What are the reasons behind the sharp rise in prices? Firstly, export conditions are slightly better. In the Indian procurement tender that concluded on November 14, a total of 1.76 million tons of urea were awarded as contracts before the bidding period ended on the 21st. Of this amount, about 420,000 tons was domestic Chinese urea, while another 150,000 tons represented urea that had been imported earlier and transferred to another port. These 420,000 tons of urea helped to alleviate the sales pressure on manufacturers capable of exporting urea. However, latest reports indicate that the amount of domestic Chinese urea that was awarded as contracts is only 320,000 tons, which might slightly dampen the trend toward price increases. Export prices have also risen since last Wednesday; the ex-ship guidance prices for urea in various particle sizes in our country have increased by $4 per ton on a weekly basis, reaching 238–243 dollars per ton. Other international urea prices have also risen by amounts ranging from $2 to $12. Additionally, India may hold new bidding processes for urea purchases at the end of December or early January, so exports should not be hindered in any way. Secondly, the order situation in areas such as compound fertilizer plants and power plants is slightly better. After several rounds of sales at low prices, the order backlog for compound fertilizer manufacturers has improved slightly, and their production rates have risen for three consecutive weeks. There is now a greater demand for urea, which has caused the purchase price in Linyi to rise from the previous low level of 1680–1700 yuan per ton to around 1730 yuan per ton at present. Recently, temperatures have dropped in many areas, increasing the demand for heating; as a result, power plants have increased the frequency of using urea, which has provided some support for urea prices. Once again, drip irrigation for winter wheat in regions such as Shandong and Hebei requires a small amount of urea. The demand for such goods in this area is time-sensitive, which has also contributed slightly to rising urea prices. Then, the urea supply decreased slightly. The utilization rate has fluctuated, with a slight decline being the main trend. The urea plants that were to cease production have basically stopped, and those that continued operating have also set aside maintenance times, mostly before the end of December. Given this, urea manufacturers are quite inclined to raise prices; they plan to do so in December, with no time to worry about what might happen in the future. Finally, there are a bit more interfering factors. To keep pace with the rising prices in the futures market, large agrochemical companies have invested a slightly larger amount of capital in the spot market. It is worth noting that for a somewhat prolonged period, some distributors would only make payments to the urea manufacturers with whom they had long-term partnerships, without taking delivery of the goods; they waited for prices to rise before making purchases. To fulfill these orders, it was more appropriate to raise prices. As long as there was any room for an increase, prices were raised, after all, there are still a few industry professionals who prefer to buy when prices are high rather than low. It’s tough and difficult for customers with essential needs – is it still possible to find a solution? Unwilling to pay high prices for purchases, and also hesitant about placing larger orders – it’s really difficult for customers with essential needs such as compound fertilizer manufacturers. At first, they had to buy goods at higher prices, only for the price to drop simultaneously. In late July, urea producers tried to raise prices four or five times, but without success. As a result, these customers now opt to purchase smaller quantities more frequently; currently, there isn’t much urea available, so they are forced to buy that urea at high prices. There’s no solution to this issue for now. But even if prices rise a lot in December, it is still very likely that they will fall at some point in January. Moreover, once these more expensive ureas arrive in various markets over the course of a week, it remains uncertain what the actual reaction will be; it is likely that the uptake of these products will not be very positive. At present, customers with essential needs can only place small orders frequently, waiting for a change in prices before trying to negotiate better terms. First, let’s observe how prices will develop around mid-December; there is a possibility of a decline. At the very least, we can wait until early January, when urea manufacturers will lower their prices in order to attract customers ahead of the New Year ； After the New Year, agricultural distributors still have a little over a month to stock up on goods. Customers who do not have an urgent need need not rush; they can continue to order smaller quantities or none at all. The market situation at the end of 2019/early 2020 is somewhat similar to that in 2016, but the specific price trends differ to some extent; we will have to wait and see. ( Che Yanhong)