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Urea prices soar; concerns remain Author/Source: China Fertilizer Network Date: 2020-03-02 Clicks: 254 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 standard 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 standard ex-factory price for urea is 1730–1760 yuan, while in Henan it is 1730–1780 yuan. In Shanxi, the standard ex-factory price for urea is 1690 yuan, with larger particle sizes costing 1740 yuan per ton. Good news kept coming: restrictions on the transportation of fertilizers were lifted in many areas, the free toll policy for highways remained in place, some companies focused on road transport, controls were placed on orders for train transport, fertilizer preparation began at local levels in areas such as the two rivers in Shandong, demand increased in the Northeast region, industrial board manufacturers gradually resumed operations, there was an increase in demand for compound fertilizers, and inventory levels in local markets were low. As a result, urea saw a strong upward trend – 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 prices will continue to rise 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 applied by distributors, with a difference of around 50 yuan. Moreover, based on the current rate of price increases by the factory, 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 the upstream and downstream parties involved in the urea industry, which will put some restraint on the upward trend in urea prices. Secondly, supply is about to increase. According to 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, moderate purchases can be made, but those who wish to hold inventory for a longer period should exercise caution. (Wu Wenchao)