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Bet on a 100% rise – is now the best time to stock up on compound fertilizers? Author/Source: China Fertilizer Network Date: 2019-12-02 Clicks: 29 At the end of November, the winter storage market is usually at its most active stage of the year; the prices for compound fertilizers for winter storage as well as the related pre-payment policies are generally clear by then. Dealers are relatively enthusiastic about stocking up supplies, and companies have a satisfactory level of shipment and production activity. In stark contrast, none of these phenomena occurred in this year’s winter storage market; it has remained stagnant since it started. Yet, just when the winter storage of compound fertilizers was in a critical situation, good news finally arrived. The so-called positive factor is the rebound in urea prices; since the beginning of the week, the main ex-factory prices of urea in Shandong and the Two Rivers regions have risen by nearly 50 yuan per ton, reaching around 1670–1710 yuan per ton. This sudden increase has boosted confidence in the winter storage market. With industrial users continuing to purchase urea steadily, agricultural users preparing fertilizer for the winter wheat crop, and some factories undergoing unplanned maintenance, the urea market is likely to remain strong in the short term. As a result, there is hope for winter stockpiling of compound fertilizers. Some reports suggest that if the price of compound fertilizers rises by 100 yuan per ton during next year’s sales season compared to current levels, it would be feasible for distributors to stock up appropriately for winter. Firstly, the inventory preparation cost is relatively low. At present, it is the period when compound fertilizer manufacturers set their winter storage prices, and the main trend is becoming increasingly clear. Based on raw material costs and supply-demand conditions, the average winter storage price has dropped by more than 200 yuan per ton compared to last year; in some cases, the price drop is even greater for certain popular products. Moreover, most manufacturers offer significant discounts, such as tiered interest rates and rebates. At present, the price of compound fertilizers has almost reached its bottom; the possibility of further declines in the prices of other raw materials is minimal. Moreover, the price of urea has started to rise. In other words, even if the price of compound fertilizers does not increase, it is unlikely to continue falling. Therefore, making purchases at this opportune time can help keep distributors’ inventory costs low, increasing the chances of profiting from future price increases. Secondly, pre-stock to seize the market. For companies, market share is often more important than profits. In recent years, competition in the compound fertilizer market has become increasingly fierce, and the market share of most companies has been fragmented; gaining a foothold in the market is the key to winning this competition. The earlier winter stockpiling takes place, the more time there is for distributing the products. Price wars are not beneficial; by acting first in terms of product distribution, it becomes easier to increase market share, which in turn helps to boost profits ； Additionally, this year’s Lunar New Year falls relatively early, leaving more time for dealers to carry out their activities after the festival. By making preparations in advance for winter storage before the festival, the burden during the sales season will be **reduced**. Finally, supply before and after the festival is uncertain. According to Zhongfei Net, as of the end of this weekend, the operating rate of large-scale compound fertilizer manufacturers across the country remained around 45%, up by 5 percentage points compared to before the phosphorus compound fertilizer meeting, showing a slow upward trend. In winter, with low temperatures and cold weather, production faces severe challenges, and coupled with the pressure from environmental inspections, there are often rumors of shortages and outages of goods. However, given the current trend toward more precise environmental regulations and an effort to avoid blanket measures, such shortages are unlikely to occur easily. Instead, supply issues after the holiday period should be of greater concern. The quantity of stock stocked before the holiday is limited, so there will inevitably be a surge in orders after the holiday, and logistics issues during shipping may lead to supply shortages. In summary, in the short term, the prices of compound fertilizers for winter storage will remain stable at low levels. Whether it comes to the costs associated with stockpiling or market dynamics, the current timing for winter stockpiling is truly a once-in-a-lifetime opportunity. There are rumors that prices of compound fertilizers might fall further, but I believe that even if there is a decline, the extent of such a decline will be very limited. Moreover, the trend of stability and strength is quite evident. Therefore, any speculation about prices rising by 100% by next spring still requires support from various positive factors.