Transactions are rare before the New Year; hope is possible after it

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Trading was scarce before the Lunar New Year; prospects may improve afterward. Author/Source: China Fertilizer Network. Date: January 22, 2020. Click-through rate: 347. As the Spring Festival approaches, monoammonium phosphate producers are gradually returning to normal operations. There are fewer transport vehicles on the road. Although some factory sales staff continue to work, new orders have largely come to an end. Few transactions took place prior to the holiday. Currently, in Hubei Province, the mainstream ex-factory price for 55% powdered monoammonium phosphate remains stable at 1,750–1,800 yuan per ton; actual cash-on-delivery prices range from 1,730–1,780 yuan per ton, with some lower quotes around 1,700 yuan per ton. The mainstream ex-factory prices for 58% and 60% powdered monoammonium phosphate stand at approximately 1,900–1,950 yuan per ton and 2,000 yuan per ton respectively; actual transaction prices are close to these levels. For 55% powdered monoammonium phosphate, most suppliers can guarantee such prices. In Sichuan Province, major manufacturers offer 55% powdered monoammonium phosphate at just 1,700 yuan per ton; reportedly, earlier guaranteed settlement prices were as low as 1,650 yuan per ton. Around early January, some large compound fertilizer manufacturers began showing intent to restock, but their purchases of monoammonium phosphate remained cautious; most orders were mere safety-net arrangements. At present, there are few orders; so how will the market for ammonium sulfate develop after the New Year? The author makes the following brief analysis: The operating rate of monoammonium phosphate has remained at a low level for a long time, and its recovery after the holiday may be rather slow. As of now, the operation rate of the ammonium nitrate industry is only 38.24%, and that in Hubei province is 39.46% as well. Throughout 2019, the overall operation rate for ammonium nitrate production remained above 50%. In previous years, this rate could reach around 70%. In recent years, due to pressures related to environmental protection and safety inspections, as well as poor sales performance, some large manufacturers of ammonium nitrate have restricted their production. It takes 2 to 3 years for some factories to resume normal operations after moving, while smaller factories have gradually shut down and disappeared from public view. In previous years, the market for monoammonium phosphate remained sluggish both before and after the holiday. A recovery took place slowly, with the market not showing any new movements until a week or even half a month later. It is expected that after the holiday, the rate of production resumption among various enterprises will also be relatively slow. Given the prolonged period of low production levels and the current low inventory levels among companies, this situation may provide some positive support after the New Year. 　　For a considerable period prior to the Spring Festival, overall demand for monoammonium phosphate remained weak. Although downstream compound fertilizer manufacturers did make purchases, these were not concentrated; moreover, they were willing to pay relatively low prices. Some guaranteed orders might reach around 10,000 tons, but many other orders were of limited volume. These fertilizer producers adhered to a just-in-time procurement strategy for an extended time, and their cautious approach to purchasing ensured that there were no significant fluctuations in the demand for monoammonium phosphate. Meanwhile, the sales performance of compound fertilizer manufacturers themselves has not been satisfactory; their operating rates have remained low for a long time, the consumption of raw materials is slow, and their enthusiasm for purchasing raw materials is also limited. The downturn before the holiday may see some improvement in purchasing activity after it; a weak demand level does not mean that no ammonium nitrate is needed, and a slow rate of consumption does not imply no consumption at all. Therefore, there is a possibility of significant stock replenishment after the holiday. 　　Although sulfur prices have not seen a significant rebound in the past month, they have stabilized amidst fluctuations. As the Spring Festival approaches, many downstream factories have ceased operations. New transactions are expected to occur only after the holiday. Although high inventory levels at ports remain a potential threat to sulfur prices, factors such as a slight recovery in international market conditions and the appreciation of the RMB have contributed to a more positive sentiment in the sulfur market. There is still a chance for further price increases after the holiday, which will also bring some favorable effects to the monoammonium phosphate market. 　　In summary, in the new year, it is believed that monoammonium phosphate will surely have opportunities to reap rewards. The market for monoammonium phosphate after the Lunar New Year may be promising; it’s merely a matter of time. 　　(Zhao Hongye)