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Urea prices are unlikely to rise in the short term; the market remains stuck in a passive state ahead of the holiday. Author/Source: China Fertilizer Network Date: 2020-01-07 Clicks: 4. Since New Year’s Day, the fertilizer market has continued to operate without showing any signs of improvement – the pessimistic atmosphere from before has persisted. As a winter storage market that has long been of interest to market participants, there is currently a slight increase in both corporate shipments and dealers’ willingness to stock up, though it has not yet reached the intense level seen during the final rush before the holiday season. The market for compound fertilizers and water-soluble fertilizers, both of which are finished fertilizers, is in a similar situation; surprisingly, the market for water-soluble fertilizers has also dropped to a low level. The fertilizer market as a whole is weak, and many attribute this to the volatile trends in urea prices; it is difficult to predict the future direction of the market, which further exacerbates the stagnation and delay in market activity. The Spring Festival is approaching; local agricultural demand is about to subside, industrial procurement activities have slowed down. Additionally, given the severe environmental conditions in certain regions during winter, there is very little remaining domestic demand ； With no positive developments in foreign markets and the results of India’s final annual urea tender being highly disappointing, the possibility of an increase in urea prices before the holiday is virtually zero. As a result, finished fertilizers that rely on urea prices to improve their market position are also facing difficulties, and water-soluble fertilizers are one such example. First, raw material prices have dropped collectively. The market price of water-soluble fertilizers is much higher than that of traditional fertilizers, resulting in relatively larger profit margins. Usually, slight changes in the prices of raw materials do not cause significant fluctuations in the market price of water-soluble fertilizers. However, recently some companies have increased the extent of their discounts, which is a form of price reduction. One reason for this is the weak market situation for nitrogen fertilizers; as mentioned earlier, there are no positive factors at present that could lead to a significant rebound in prices ； The second reason is that the price of potassium dihydrogen phosphate has generally declined, and the high pricing previously offered by some manufacturers has also disappeared. Raw material prices have plummeted across the board, resulting in insufficient cost advantages; as a result, water-soluble fertilizer manufacturers are forced to offer greater discounts. Secondly, demand is low during peak seasons. Unlike traditional fertilizers, the winter season is often considered a peak period for the demand for water-soluble fertilizers, mainly due to the widespread cultivation of fruits and vegetables in greenhouses in certain regions, such as the Northwest and North China. In recent years, the profits from growing field crops have been declining year by year. Following a significant adjustment in the crop mix, the area dedicated to growing cash crops has increased substantially, which in turn has raised the demand for water-soluble fertilizers. However, demand in certain areas has not shown any improvement this winter; one reason for this is that the prices of some fruit varieties this year are low, resulting in reduced enthusiasm among fruit growers to plant them ； Secondly, local natural disasters occur frequently; although greenhouse farming is not greatly affected by them, climate change does influence the pace of agricultural activities to some extent. Finally, additional costs increase. Just as businesses are grappling with the rising costs of raw materials, fluctuations in additional costs are causing them even more “pain”. With the increasing environmental protection pressures in winter, many enterprises experience frequent disruptions in production, which indirectly raises their production costs ； Additionally, it has been reported recently that railway freight rates in certain areas such as the southwest have increased by 20% compared to before, and strict inspections against overloading are being carried out in many places; as a result, the cost of transporting fertilizers has risen. While companies strive to maintain their profits and gain market share, they must also deal with the additional pressure caused by rising freight costs. The benefits that should have come from the peak season in winter have now disappeared. In summary, the market conditions for raw materials ahead of the Spring Festival are likely to remain weak, especially since urea prices are unlikely to rise further. Apart from the lack of favorable factors related to raw materials, issues with demand and supply have led to a very passive market situation for water-soluble fertilizers during the winter period; just like compound fertilizers, the market is expected to remain stagnant in the short term. (Feng Hongyang)