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Urea prices soar; concerns remain Author/Source: China Fertilizer Network Date: 2020-03-02 Clicks: 3 Since last Saturday, urea prices have continued to rise. With the exception of Xinjiang where prices remained stable, there were varying increases in other regions, with some areas seeing increases of over 100 yuan per ton. In Shandong, the typical ex-factory price for urea is 1750–1760 yuan; in Linyi, compound fertilizer manufacturers are purchasing urea at 1780 yuan per ton. In Hebei, the typical ex-factory price for urea is 1730–1760 yuan, while in Henan it is 1730–1780 yuan. In Shanxi, the typical ex-factory price for urea is 1690 yuan, with larger granules costing 1740 yuan per ton. Good news kept coming: restrictions on the transportation of fertilizers were lifted in many areas, the policy of free highway tolls remained in place, some companies focused on road transport, controls were placed on orders for train transport, preparations for fertilizer production began in areas such as the two rivers in Shandong, demand increased in the Northeast region, industrial plate manufacturers gradually resumed operations, there was an increase in demand for compound fertilizers, and inventory levels in local markets were relatively low. As a result, urea prices saw a sharp rise; it was not uncommon for companies to raise their prices on that day or even to suspend accepting new orders. Even companies in the Northeast that had been shut down for a long time raised their prices as well. Urea is already a favorite in the fertilizer market, and such price increases have drawn attention from the industry. However, it is not certain whether these increases will continue in the long term. Considering the current situation, several \"concerns\" must be taken into account. First, the market has shown an inversion, and the price gap needs to be resolved. Given the relatively large increase this time, the price set by the factory at the current stage is higher than the selling price imposed by distributors, with a difference of around 50 yuan. Moreover, considering the extent to which the factory is raising prices, this gap is likely to continue to widen in the future. At present, the strong demand at the grassroots level has not yet fully emerged, and with the gradual arrival of supply shipments, the market’s acceptance of the high prices set by the factory is decreasing. If this situation persists, even though the downstream market will gradually accept higher prices, a competitive situation will arise between upstream and downstream parties involved in the urea industry, and the upward trend in urea prices will be somewhat curbed. Secondly, supply is about to increase. According to statistics from China Fertilizer Network, the current daily production of urea across the country is 145,900 tons. Enterprises in Xinjiang and Inner Mongolia that rely on gas as a raw material are set to resume operations soon, and some coal-based enterprises in Shanxi also plan to restart production in mid-March. By then, the daily supply of urea could exceed 150,000 tons. However, there is no significant increase in market demand this spring, and the overall operating rate of compound fertilizer factories is lower than it was during the same period last year. The distribution of agricultural products is gradually moving down to the grassroots level ； At present, the prices are not in line with international levels. Even if large-scale tenders are launched again in the Indian market, given the current condition of the factories, there is likely to be little interest; without an effective increase in supply, upward price movements are likely to be hindered. In summary, during these special times, transportation was severely restricted in the early stages, and the deferred demand is now being released in large quantities. Given the orders currently pending at factories as well as the needs related to preparing fertilizers for spring planting, urea prices are likely to remain high in the short term, with even further increases possible. However, the overall supply of urea will increase over time, and as supplies arrive in various markets, it will be difficult for urea prices to continue rising at this pace. If there is an urgent need, it is advisable to make purchases in appropriate amounts; but if one intends to hold inventory for a long period, caution is still necessary. (Wu Wenchao)