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Rising Prices of Urea: A Stale Market Author/Source: China Fertilizer Network Date: 12-09-2019 Clicks: 107 Although the rate of increase in urea prices has slowed down recently, the daily prices quoted by some domestic factories still range from 10 to 20 yuan per ton. In Shandong province, the standard ex-factory price for urea is 1670–1720 yuan per ton. In Linyi, compound fertilizer manufacturers are purchasing urea at prices between 1720 and 1730 yuan per ton. Local urea production remains stable for now; although there are still those on the sidelines waiting to see what happens, industrial users and those in the compound fertilizer sector have begun to purchase urea in moderate quantities. Despite an increase in the supply of urea locally, its price has not dropped. The supply and demand situation for urea remains stable for now. Some industry insiders remain optimistic about future urea prices, believing that there will still be demand in the coming period. In Hebei province, the standard ex-factory price for urea is 1690–1710 yuan per ton, while in Henan it is 1700 yuan per ton. In Shanxi, the standard ex-factory price is 1620–1630 yuan per ton, with larger-grained urea costing 1620 yuan per ton. Even in Xinjiang, where prices are usually low, the standard ex-factory price for urea has risen to 1330–1450 yuan per ton. Driven up by rising urea prices, the overall market for nitrogen fertilizers has seen some improvement. However, as most industry insiders know, although they accept the recent rise in urea prices, they find it difficult to accept purchasing urea at such high prices. The reasons for this situation are as follows: First, the peak season for winter storage has not yet fully begun. Although it is already December, so far traders have less than 40% of their winter storage inventory in hand. Both compound fertilizers and diammonium phosphate have seen poor market conditions; payments have been made but delivery has not yet taken place. In particular, for 64% diammonium phosphate, the pickup price at the Bayuquan port is around 2300 yuan. Coupled with an oversupply of production capacity and output for various types of fertilizers, the timing for making substantial winter storage purchases is being postponed year after year. To avoid risks, the downstream market, despite acknowledging the upward trend in urea prices, is showing relatively low purchasing activity. Secondly, there are still low-cost supply sources available. Some urea distributors purchased some urea at low prices earlier on. Although there is still a certain demand gap in the market later on, acceptance among end-users in the local markets is limited. The market price is currently rising, but if urea is purchased at higher prices, sales pressures will remain; therefore, distributors have no plans to buy urea at higher prices for now. Finally, there are still concerns regarding the price of urea in the later period. Considering the recent supply and demand situation for urea, the demand in the market is not sufficient to justify a price increase of 100 yuan for urea. Despite the sharp rise in urea prices this time, market reactions have been mild. Moreover, the overall daily production capacity of the urea industry remains at around 130,000 tons, so there are still certain uncertainties regarding urea prices in the future. Although the market is currently at a standstill, there is still a tendency for urea prices to rise. Although demand in the winter storage market has not yet started, there is still potential demand in the future. There are rumors that India will issue another tender around mid-month. Taking into account the production cuts imposed by companies that are currently operating at reduced capacity, urea prices may not rise in the near term, but they can at least remain stable for now. (Wu Wenchao)