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Urea: Demand rises in spring, prices soar Author/Source: China Fertilizer Network Date: 2020-03-02 Clicks: 7 March has arrived, and farmers across the country are eager to start working. Nitrogen and phosphorus fertilizers see significant price increases, potassium fertilizer prices also rise slightly, while compound fertilizers continue to drive up prices. Take urea, for example: since mid-to-late February, its market price has been on the rise, with strong rebounds and continuous increases in price ； Even prices in areas such as Shanxi, which have been considered low-lying for many times, have seen a significant increase. With the increase in demand from the agricultural industry, urea manufacturers have a sufficient amount of orders pending, which makes price increases easier to implement. Urea prices have seen a comprehensive rise in line with the seasonal trends; demand increases in spring leads to a sharp rise in urea prices. This increase is also attributed to some improvement in transportation conditions following the easing of the pandemic, which reduces the difficulties faced by companies in selling their products. Currently, the mainstream ex-factory price of urea in Hebei is between 1,730 and 1,760 yuan per ton, while in Shanxi it is around 1,690 yuan per ton. Fertilizer manufacturers in Linyi pay around 1,780 yuan per ton for urea; of course, different factories offer varying discounts on their products. As time goes by and more products reach the grassroots markets, some urea manufacturers suggest that this trend in urea prices may continue for about a week. As a result, the overall market sees rising prices; of course, it is important not to overlook the following influencing factors. First of all. The significant rebound in the operating rate of the urea industry must be watched carefully. As demand increases in various regions, the operating rates of urea manufacturers have begun to rise. According to China Fertilizer Network, the operating rate of domestic urea manufacturers is around 52%, with a daily production volume of approximately 145,900 tons. Moreover, with improved transportation conditions, urea manufacturers are highly motivated to resume production and increase output ； However, the market for liquid ammonia has seen a rebound at present, with prices rising significantly; in many areas, the price ranges from 100 to 300 yuan per ton, or even more. Taking advantage of the favorable trends in the liquid ammonia market, some companies have shifted their production focus slightly toward liquid ammonia, which has led to a slight decrease in urea production. Yet, given that liquid ammonia prices are sensitive to market changes, it is necessary to keep an eye on price fluctuations. If these prices drop rapidly, then companies will once again shift their production focus to urea, thereby increasing production levels. Secondly, demand picks up in spring. Demand for urea continues to show positive trends. It has been nearly half a month since agriculture activities resumed, and the prior purchases made by large agricultural supply companies and local traders based on their needs have led to a shortage of urea supplies at present. As a result, the recent concentrated purchases have also contributed significantly to an increase in urea prices ； Additionally, as March arrives, demand in the Northeast region has also come to attract significant attention. Once that demand starts to increase, there will be a considerable gap in the Northeast market, and supplies from surrounding areas will continue to flow into it. The improvement in industrial demand is favorable for the urea market on one hand; however, due to factors such as the pandemic and the profitability of enterprises, some plywood factories will continue to operate at a low level, resulting in limited demand for urea ； However, the biggest factor supporting it is the simultaneous initiation of purchases for raw material reserves at industrial compound fertilizer plants; as the demand for compound fertilizers increases, their prices are rising gradually. Coupled with the limited amount of urea in the reserves available earlier on, this concerted resumption of production boosts the demand for raw materials used in fertilizer production, especially urea. Once again, the indirect support for urea provided by the minor nitrogen fertilizer ammonium chloride and liquid ammonia. Currently, the market trend for ammonium chloride is positive, with prices rising slowly and slightly in some areas. Moreover, driven by the onset of spring demand and the scheduled maintenance of ammonium chloride production facilities at major manufacturers in certain regions, some companies have indicated that they will modestly raise ammonium chloride prices around mid-month. This will undoubtedly provide support to the urea market ； Furthermore, the price of liquid ammonia is currently rising sharply. If there are constraints on the price of urea, it is possible that companies will shift their production focus back to liquid ammonia, thereby reducing urea production. In summary, the current urea market is still responding to the increase in demand from industry and agriculture, as well as to the limited inventory levels at the downstream end. Additionally, with rising prices for compound fertilizers and a surge in orders for urea as a raw material, it is expected that the urea price will continue to rise in the short term, over a period of about ten days. However, once demand enters a more stable phase, the rate of increase will decrease, and the overall trend will slow down.