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To be honest, the rise in urea prices seems a bit excessive. Author/Source: China Fertilizer Network; Date: 2020-01-06; Clicks: 8. Around mid-December, as air pollution indices increased across the country, orange environmental warnings were issued in most regions. As a result, more chemical plants across the country had to shut down or reduce production, which in turn had a significant impact on urea manufacturers. Although it was stated that these environmental warnings would be lifted after January 1st, some areas in Shandong have once again entered an orange warning status. However, the urea market has seen a slight improvement from its previous sluggish condition. Currently, the ex-factory price of small-grained urea in Shanxi is around 1590 yuan per ton, while the price for large-grained urea is between 1600 and 1620 yuan per ton. Some factories have even started to limit new orders and suspend payments at this stage； The ex-factory prices of large-grain urea in Shandong region have also increased; currently, the prices for high-quality grades have risen to around 1800 yuan. Given that some agricultural traders in the downstream sector will place orders in advance of the New Year, there is a tendency for urea prices to continue rising. However, considering the overall market situation, it seems that a further increase in urea prices is unlikely at this time. Firstly, there is still potential for an increase in urea production in the later stages. Although the ammonia-based production enterprises in Kawanoe are currently shut down or operating at reduced capacity, most of them plan to resume production around mid-January. Additionally, the ammonia-based production enterprises in Inner Mongolia will also restart operations, which will lead to an increase in overall supply. Meanwhile, the coal-based production enterprises in Jiangsu, Xinjiang, Shanxi and other regions are also set to resume production. Rough estimates suggest that by mid-January, the daily output of urea will reach around 130,000 tons, resulting in increased supply pressure. Such a situation exerts a certain restraining effect on rising urea prices. Secondly, market demand is relatively weak. Since mid-December, although some chemical plants have continued to operate at night, the overall demand in the industrial sector has weakened. Meanwhile, the agricultural market remains on the sidelines at this time. Additionally, transportation is hindered due to environmental concerns, resulting in relatively high inventory levels among factories. The average operational rate in the compound fertilizer industry is only around 40% ； This time, the volume of goods tendered by India’s MMTC was only 705,000 tons; China contributed 290,000 tons (including transshipment goods). Industry insiders expect that only 2–3 shipments will consist of domestically sourced goods. At present, there is no significant increase in demand across various sectors. Given that supply will gradually increase in the future, it is likely that an increase in urea prices will not materialize until demand starts to rise noticeably. Finally, with advance orders for the Spring Festival, prices may drop further. As the Spring Festival approaches, some urea producers have begun gradually collecting payments for the holiday period. However, at present, the downstream market holds relatively more leverage. It is unlikely that the supply-demand dynamics will change significantly before the festival. To ensure smooth collection of payments, prices may decline further during that time. In summary, recently there has been a slight uptick in urea prices in some regions; however, this is merely a trial move to gauge the response from downstream buyers. The actual market demand has not shown any significant improvement. On the eve of the holiday, due to increased supply and the need to ensure normal shipments during the holiday period, it is expected that transaction prices may dip slightly. Nevertheless, to maintain market stability after the holiday, the extent of price reductions is likely to be relatively limited. In fact, it’s even possible that prices could rise again for certain companies once their order books become fully booked.