Urea like fire – until when will the high temperature persist?

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Urea at Record Highs: How Long Will This Last? Author/Source: China Fertilizer Network Date: 2020-03-09 Clicks: 7 Since the outbreak of this pandemic, the term “high temperatures” no longer evokes extreme fear, but it still causes concern. Enterprises across the country have either resumed operations or are on their way to do so. After the Spring Festival, the price of urea first declined before rising sharply. Driven by demand for blended fertilizers in the northern markets as well as local farming needs, the price of large-grained urea has remained particularly high. It is reported that recently, some large manufacturers sold urea at auction at warehouses in Suihua at a price of 2170 yuan per ton; supply is tight. The market for small-grained urea is relatively stable. Currently, the average ex-factory price of urea in Shandong is 1790–1800 yuan per ton, while compound fertilizer manufacturers in Linyi pay around 1860 yuan per ton for urea. In Hebei, the average ex-factory price is 1770–1790 yuan per ton, in Henan it’s 1780–1810 yuan per ton, and in Shanxi it’s 1720 yuan per ton, with large-grained urea costing 1920 yuan per ton. Due to the entry of large traders into the market, limited supply in the early stages, relatively low inventory levels across regions, and concentrated demand, urea manufacturers have raised prices more significantly than those in the local markets. In some areas, prices have even reversed. Some industry insiders, facing empty warehouses, are hesitating about whether to purchase urea at such high prices. How long will these high prices for urea continue? Several factors determine this. 　First, how long can strong demand last? The main reason for this increase in prices is the imbalance between supply and demand: there is strong demand from end-users, yet shipments are hindered. As transportation gradually resumes, demand for various fertilizers remains high. Industrial compound fertilizer manufacturers are also starting to resume production. Considering the northeastern region, where fertilizer use is delayed the most, the latest date for ending fertilizer use at the grassroots level is around mid-May; therefore, manufacturers should complete large-scale shipments no later than mid-April, while companies that produce blended fertilizers should start large-scale production no later than the end of March. Based on this, urea manufacturers are currently in a peak period of supply, but this period should not last beyond the end of this month or the beginning of next month. Agricultural demand is expected to persist slightly longer than supply, but after the end of this month or the beginning of next month, market demand will gradually decline, and urea prices will likely not remain as high as they are at present. 　Secondly, the order waiting time for enterprises after an increase in supply. According to statistics from China Fertilizer Network, the national urea production volume at present exceeds 150,000 tons. Some companies that had stopped production earlier have already resumed operations, and their facilities will be able to produce products by March 15. With more companies resuming production, it is estimated that the daily urea production in China could reach at least 160,000 tons by the end of March. As mentioned earlier, although demand remains strong at present, it is expected to weaken in the future, which could lead to a change in the supply-demand balance. Given the current international situation, it is unlikely that China will export large amounts of urea. Moreover, based on the current orders, companies only have enough supplies to last for about ten days left and right; therefore, the supply-demand balance is about to change, and there is a risk of a decline in urea prices. 　In summary, given the current supply and demand situation, urea prices are likely to remain stable at high levels; there is even a possibility of further increases. The inverted price gap will also gradually converge with the actual pricing levels set by companies. However, due to the potentially large supply from companies in the future, urea prices might decline after this period of high market demand ends. 　(Wu Wenchao)