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Urea Breaks Through the Constraints: A \"Back-and-Forth\" Price Increase Author/Source: China Fertilizer Network Date: 2019-12-06 Clicks: 5 Nitrogen, phosphorus, potassium, and compound fertilizers can be humorously referred to as the \"F4\" of the fertilizer industry; however, they haven’t played any role in creating a dramatic situation. Instead, industry experts are still concerned due to the weak performance of these fertilizers. There’s little activity in terms of stock accumulation, and there is considerable pressure on sales, with a persistent bearish sentiment among stakeholders. Only nitrogen fertilizer urea managed to overcome the difficulties; its market situation improved and its price rose. However, the urea market did not experience unregulated price changes, but rather a seesaw pattern of rises and falls, with periods of decline followed by further increases. Whether due to restrictions on natural gas supply, rigid industrial demand, or the lingering effect of speculation surrounding the approaching deadline for bids in India, urea prices have indeed risen. Currently, the mainstream ex-factory price of urea in Hebei is around 1680–1710 yuan per ton, while in Shandong it is around 1670–1720 yuan per ton. In Inner Mongolia, the mainstream ex-factory price of urea is around 1500–1570 yuan per ton; of course, discounts can be applied in case of a deal is struck ； Due to the complex interplay of limited positive factors and continuous negative influences, there is little momentum behind price increases for urea; prices have already started to drop in some markets, and it is inevitable that there will be a situation where goods are available but no buyers. So how will this seesawing “plot” develop from here? On the one hand, it is necessary to consider the changes in the operating status of urea manufacturers. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises is around 45.75%, with a daily production volume of about 128,400 tons. The price of liquid ammonia, which is closely related to this, has seen a strong rebound and continues to rise, providing solid support for urea. If the price of urea starts to fall, some companies will shift their production focus to liquid ammonia, giving urea a way out ； Recently, the issues of limited supply of raw natural gas and high prices for gas have once again become topics of focus. In regions such as Sichuan and Chongqing, low operating rates of urea production plants are due to problems with natural gas supply, which has led to an overall increase in urea prices ； In addition, in regions such as Shaanxi, Henan, and Jiangsu, some urea manufacturers have had their production restricted or halted due to environmental and safety inspections, resulting in a reduction in operational capacity. That said, as the urea manufacturers that were under maintenance resume operations, the positive factors for urea decrease. In the long term, the liquid ammonia market will be constrained by factors such as transportation and storage; therefore, there should be a decline in prices before the Spring Festival, which will weaken the support for urea prices – something that urea manufacturers need to be vigilant about. On the other hand, overall demand in industry and agriculture is limited. The period for using agricultural fertilizers is quite long; if there are many variables in preparing the fertilizers now, the risks are high ； The large agrochemical companies are also aware of the implications involved, so they opt for a flexible approach of purchasing as needed; secondary or local distributors certainly will not stock up on urea at this time. Industrial clients should not place too many expectations on plywood factories for now; due to the pressure of environmental inspections, as well as factors related to the factories’ own conditions and profitability, the operation rate remains low, and there will be no significant purchases before the New Year ； Purchases by compound fertilizer manufacturers are a key factor in the improvement of the urea market situation. Although these companies have weak internal demand and it is difficult to introduce new policies, production must continue ahead of the Spring Festival, and activity is gradually picking up; as a result, purchases of nitrogen fertilizer raw materials are set to increase in the near future. The price retention of the small nitrogen fertilizer ammonium chloride provides support for urea. The improvement in the market conditions for ammonium chloride is a small surprise; as support policies are gradually reduced, sales volumes have increased as well, and prices remain stable. Steady sales represent the current situation in the ammonium chloride market, with its negative impact on urea decreasing. In summary, the complex interplay of positive and negative factors has led to a stagnant, back-and-forth trend in its price. It is expected that urea will continue to see only minor price fluctuations; there is no chance of significant price increases in the short term, nor any expectation of price drops. (Tan Junying)