Thread Content
Urea is in short supply – will compound fertilizers take its place? Author/Source: China Fertilizer Network Date: 2020-03-02 Clicks: 255 As the saying goes, even a skillful housewife can’t cook without rice. At the end of February, significant changes occurred in the fertilizer market; the current situation in the compound fertilizer sector reflects this issue. Many compound fertilizer manufacturers are facing shortages of raw materials. Due to insufficient supply from upstream sources, several key compound fertilizer companies in Shandong Province are operating at less than full capacity – Shikefeng operates at 80% capacity, Jindal has only 60% capacity, and Lunan Chemical operates at just 50% capacity. A few companies have raw material reserves that will last only 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 increase in prices? First, the operating rate of urea manufacturers increased, but demand 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 keeping rising, demand remains high and it is difficult to obtain supplies; some companies are facing demands 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 diammonium market, demand from agricultural sectors is gradually increasing as more orders come in; however, due to insufficient stockpiling in the earlier stages, there is considerable pressure on shipping. The demand for monoammonium raw materials by most compound fertilizer manufacturers is only sufficient to cover production for about half a month to one month. As a result, the price of monoammonium increased significantly, with some increases reaching around 300 yuan per ton compared to the period before the Spring Festival. Once again, due to a shortage of raw materials and low production levels, the prices of compound fertilizers have risen passively. At present, the operating rate of compound fertilizer manufacturers remains between 30% and 40%. Only in some regions such as Shandong, Jiangsu, and Hebei are these manufacturers operating at a reasonable level. In Hubei, the operating rate is low due to the impact of the pandemic, while in the Northeast, companies are recovering slowly and the rate of operation is not increasing quickly. Most compound fertilizer manufacturers have limited stock of finished products; some send out around 6,000 tons of goods per day. Supply is very tight, and at the same time, raw material prices are rising and are in short supply. As a result, the prices of compound fertilizers are forced to increase as well. 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; the situation is similar to waiting for rice to be cooked. Additionally, the lack of workers and transportation issues are also problems that need to be addressed urgently. Recently, the price of urea has been rising steadily, causing turmoil in the fertilizer market. In the short term, an upward trend is likely to continue until March 2nd. As for whether this upward trend will persist in the future, it will depend on the control of the epidemic in Hubei province, as well as the transportation of raw materials and the rising prices of such materials as urea. However, it is highly probable that fertilizer prices will continue to rise this spring.