Thread Content
Urea prices rise on \"emotional\" factors; market approaches the situation \"rationally\" Author/Source: China Fertilizer Network Date: 12-06-2019 Clicks: 5 At the beginning of December, as the year comes to an end, the winter storage phase is highly anticipated as a key moment in the fertilizer market. As the saying goes, “the greater the expectations, the greater the disappointment.” Indeed, this year’s winter storage market did not bring many surprises. At present, the pricing for winter stockpiling of compound fertilizers has been almost fully determined, and preferential policies are also gradually becoming apparent; however, there are very few positive factors. Not only is this the case for compound fertilizers, but water-soluble fertilizers, which serve as alternative products, are also facing difficult times this winter. If we are to identify some positives for finished fertilizers such as compound fertilizers and water-soluble fertilizers, then the recent emotional-driven price increases in the raw material urea cannot be ignored. Since the late November, urea prices have risen in many parts of the country, with some areas seeing increases that far exceeded expectations. As of today, the standard ex-plant prices for urea in Shandong and the Two Rivers regions are between 1670 and 1720 yuan per ton. Demand from downstream industries remains decent, while agricultural demand has seen a slight increase. The steady upward trend has fueled a strong willingness among downstream buyers to purchase at higher prices. Coupled with rumors of international tenders in the near future, the domestic urea market is expected to remain strong in the short term. The sudden rise in urea prices has, to some extent, boosted the overall atmosphere surrounding winter storage, but given the volatile nature of urea prices, it is important to adopt a \"rational\" approach. Compared to other fertilizers, water-soluble fertilizers rely less on urea; rather, it is various abnormal factors that hinder their development. First, rising raw material costs result in low profits. Unlike traditional fertilizers, the raw materials for water-soluble fertilizers have relatively high costs; as a result, their quality is higher, and they generally exhibit stronger water solubility. Generally, the market price of water-soluble fertilizers remains stable over time, mainly because raw material costs fluctuate little and profit margins are relatively high. Potassium dihydrogen phosphate is one of the key raw materials used in the production of water-soluble fertilizers. In China’s main production areas such as Sichuan, the prevailing Out of factory price is between 7,300 and 7,500 yuan per ton, which represents an increase compared to the prices at the beginning of the year. As a result, if the company insists on its previous pricing, profits will inevitably decrease. On the other hand, raising prices will also likely dampen the enthusiasm of downstream buyers to make purchases. Secondly, the share of compressed demand space is small. In addition to raw material costs, downstream demand also plays a significant role in determining the price of water-soluble fertilizers. Generally, autumn and winter are the peak seasons for demand for water-soluble fertilizers, and market activity is fairly good during these periods. However, this year the development of the water-soluble fertilizer market in this phase has been somewhat slow. One reason for this is the overall weak condition of the fertilizer market, along with a pessimistic atmosphere that has led to increased caution among end-users, resulting in hesitation during the fertilizer procurement stage; there is also a noticeable lag in market dynamics ； The second reason is the intensifying market competition; issues such as a large number of brands and diverse product types are affecting the healthy development of the water-soluble fertilizer market. The market share of many traditional established companies is continuously shrinking, and as a result, more and more problems are arising. Finally, there is significant pressure to increase other costs. Apart from raw material costs and supply-demand dynamics, which primarily determine the price of water-soluble fertilizers, other costs also influence their price trends. Since the onset of winter, heating seasons have begun in various regions. The rising demand for natural gas has led to an increase in its price. With environmental protection measures being implemented as a norm, the transition from coal to natural gas has been carried out effectively. Most fertilizer producers have a significant demand for natural gas, resulting in a corresponding rise in their production costs ； Furthermore, following the recent \"Wuxi bridge collapse accident,\" many areas have begun to enforce stricter regulations against truck overloading. At the same time, freight costs have risen as a result, and the icy and slippery road conditions in winter further increase transportation costs. In summary, in the absence of any significant positive factors, the rise in urea prices seems somewhat \"emotional.\" However, the overall market atmosphere is likely to be more \"rational.\" Moreover, water-soluble fertilizers rely little on urea; unless the fluctuations in urea prices are extreme, the possibility of a stalemate persisting in the fertilizer market remains high.