Urea is in short supply; is there a need for compound fertilizers as well?

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Urea is in short supply; is there a need for compound fertilizers as well? Author/Source: China Fertilizer Network Date: March 2, 2020 Click-through rate: 1 As the saying goes, “Even the cleverest housewife can’t cook without rice.” At the end of February, significant changes occurred in the fertilizer market. The recent situation regarding compound fertilizers is a case in point: most compound fertilizer manufacturers are facing a critical shortage of raw material inventories. Due to insufficient supply from upstream sources, several major compound fertilizer enterprises in Shandong Province are operating below capacity. For instance, the production rate at Sikefeng is 80%, while that at Kingenta is merely 60%. At Lunan Chemical, it’s only 50%. Meanwhile, a few compound fertilizer companies have raw material stocks sufficient for use for just about half a month. So in this case, will there be a severe shortage in the fertilizer market in the future, leading to a sharp rise in prices? Firstly, the operating rate of urea producers has risen, but demand has surged. After mid-February, the operating rates of nitrogen fertilizer manufacturers in the fertilizer industry have been rising slowly. Compared to manufacturers of compound fertilizers, those producing urea have seen a better recovery in their operating rates. Currently, the daily total production of urea across the country is around 140,000 tons, an increase of about 20,000 tons compared to the period before the Spring Festival. Yet despite this improved operating rate for urea manufacturers, the surge in demand and rising prices of raw material coal have continued to drive up urea prices. With prices kept rising, demand remains high and it is difficult to obtain supplies; some companies are facing demand levels of over 10,000 tons per day, creating a very tense situation. Secondly, due to the impact of the pandemic, the production of monoammonium is low, resulting in a supply shortage. Hubei province has been severely affected by the pandemic, and companies plan to resume production after March 10th. At present, most enterprises in Hubei are not offering quotes or accepting orders from outside; however, some larger companies are willing to take on a limited number of orders from their key clients. It is reported that the ex-plant price of 58% ammonium sulfate has risen to 2050, while the ex-plant price of 55% ammonium sulfate has also reached 2050, with shipments scheduled to begin shortly. In the downstream DAP market, agricultural demand is gradually picking up, leading to an increase in inquiries. However, due to insufficient inventory buildup earlier on, there is currently significant pressure regarding shipments. For most compound fertilizer manufacturers, the supply of monoammonium phosphate raw materials can only meet production needs for about half a month to a month. As a result, the price of monoammonium phosphate has risen significantly; in some cases, the increase compared to before the Spring Festival is as much as 300 yuan per ton. Once again, due to a shortage of raw materials and low operating rates, quotes for compound fertilizers have risen passively. At present, the operating rate of compound fertilizer manufacturers remains between 30% and 40%. Only in certain regions such as Shandong, Jiangsu, and Hebei are these manufacturers operating at a reasonable level. In Hubei, the impact of the pandemic has resulted in a low operating rate for compound fertilizer manufacturers, while in the Northeast, the resumption of production is slow and the increase in operational activity is also gradual. Most compound fertilizer manufacturers have limited inventory of finished products; some companies ship around 6,000 tons per day, and supply is very tight. Meanwhile, raw material prices are rising and are in short supply, which forces an increase in the prices of compound fertilizers. Initially, a few manufacturers planned to raise prices by 50 yuan per ton, but now they are considering increases of up to 100 yuan per ton. Finally, there is a shortage of raw materials for compound fertilizers; production is currently on hold due to this lack of supplies. The shortage of workers and transportation issues also need to be addressed urgently. Recently, urea prices have been rising steadily, causing quite a stir in the fertilizer market. In the short term, it is likely that prices will continue to rise until March 2. Whether this upward trend will persist thereafter depends on how well the epidemic is brought under control in Hubei Province, the status of raw material transportation, and the price movements of urea and other raw materials. Nevertheless, it is highly probable that fertilizer prices will rise this spring.