Urea prices rose before the New Year – why are diammonium fertilizers available at low prices so often?

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Urea prices rose before the New Year – why are diammonium fertilizers available at low prices so often? Author/Source: China Fertilizer Network Date: 2020-01-20 Clicks: 561 With the Lunar New Year approaching, urea prices remain high. The export price of large-grain premium urea from some factories in Shandong has reached around 1,900 yuan per ton (the same unit is used throughout). Demand from downstream industries has increased; although production has resumed in some factories in the southwest and prices have dropped slightly in certain areas, urea prices across the country still remain relatively high. In contrast, the price of diammonium nitrate has remained low. Although several large companies have set the settlement prices for the first phase recently, low prices continue to appear in the market. Why could the price of urea keep rising before the New Year, while the price of diammonium nitrate keeps falling? First of all, the demand from agriculture has not yet arrived. The main reason for the rise in urea prices before the New Year was the increase in industrial demand, which meant that some companies had already received all the orders they needed to fulfill during the Spring Festival, resulting in high prices. However, for diammonium compounds, industrial demand is minimal; the main market remains the agricultural sector. However, the situation for farmers selling grain this year is not optimistic; there is a shortage of funds for purchasing fertilizer. Additionally, with ample time available after this year’s Spring Festival, downstream distributors are not very enthusiastic about carrying out winter stockpiling. The winter stockpiling market is lagging behind at its worst level in recent years. According to statistics from China Fertilizer Network, the amount of diammonium phosphate that arrived in the Northeast region before the New Year was only around 30 to 40 percent of the usual amount. Although demand in the after-market still exists, the pattern of \"price increases during off-peak seasons and price drops during peak seasons\" that has occurred frequently in the winter storage market in recent years has left downstream distributors on high alert. Currently, the price of diammonium phosphate remains on a downward trend. Most local distributors intend to stock up after the New Year in order to avoid risks, and large traders are also reluctant to ship large quantities, so the price of diammonium phosphate cannot rise. Secondly, production started to decline slightly, but exports remained weak, and there continued to be an oversupply. Since January, some factories have stopped production for maintenance, resulting in a slight decline in operational activity within the diammonium industry. Additionally, there are rumors in the market that after the meeting in Guiyang, large domestic manufacturers will reduce production by 600,000 tons in the first quarter. But how much impact can such a reduction have on the current winter storage market? Just look at the market where low prices are appearing frequently these days. In the international market, prices have risen in Europe and the Americas. However, prices in India and Pakistan, which are China’s main markets, have not increased. Inventory levels in India remain high, and the CIF price remains at a low level of 292–296 dollars. Chinese manufacturers, on the other hand, hope to keep the FOB price above 290 dollars; there is thus a gap of nearly 20 dollars, and the difficulties faced by Chinese exporters remain unresolved. Weak exports, along with continued production cuts that have failed to boost confidence in the domestic market, have failed to change the situation of oversupply. Finally, sulfur prices rose slightly, with insufficient cost support. Recently, sulfur prices have risen slightly; it is said that the price of granular sulfur at the Yangtze River port has climbed to around 600 yuan, but there are no reports of any transactions yet. Even if this price is confirmed, what impact will it have on the production costs of diammonium? On the one hand, most diammonium fertilizer manufacturers place their purchases under quarterly contracts; according to Zhongfei Net, the current price of sulfur at the factory is around 600 yuan ； On the other hand, the inventory of sulfur in ports itself has not decreased, and there has been no significant improvement in the international market; therefore, a decline is still a risk in the future. In summary, the current situation in the diammonium market is caused by various factors. Apart from a few extreme cases, the only way to break this deadlock is to wait for the increase in fertilizer demand during spring; I will continue to monitor market changes after the New Year. (Rong Guangwen)