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Liquid ammonia prices surge – more good news for urea? Author/Source: China Fertilizer Network Date: 2020-03-12 Clicks: 53 As urea prices keep rising, liquid ammonia prices are also increasing in tandem. Now, with urea prices showing some weakness, liquid ammonia prices have risen significantly in many parts of the country, by around 100–300 yuan per ton (prices per ton, same below) ； Urea and liquid ammonia may shift from a situation of complementarity to one of competition. Even the fertilizer and chemical industry in Hubei Province, which was on the verge of total collapse, is showing improvement these days; the price of liquid ammonia has risen by 150 yuan, while the reference price at the factory gate is between 2300–2350 yuan, or slightly higher ； An additional 50-100 yuan in North China, and an additional 100 yuan in East China. Looking at urea, which continues to attract significant attention recently, its daily production volume has increased markedly. According to statistics from China Fertilizer Network, the current daily production of urea is around 161,300 tons. While this is not an extremely high figure, it is still considerable. Despite this, urea prices in China remain high; in fact, some urea manufacturers are even considering raising prices. However, due to seasonal fluctuations, the prices of urea at certain companies have dropped by 10–20 yuan, indicating a slightly weaker market trend. Has the recent sharp rise in liquid ammonia prices brought further benefits to urea? First, liquid ammonia prices are rising generally, but the duration and extent of this increase are likely to be limited. Firstly, the recent continuous rise in urea prices has led companies to shift their production focus to urea; as a result, the overall supply of liquid ammonia has become somewhat tight ； Secondly, as the epidemic situation is brought under control in various regions, transportation conditions are improving in many places, and the flow of liquid ammonia is smoother than before; it is possible that some liquid ammonia manufacturers will resume production soon ； Thirdly, some ammonia-using enterprises are gradually resuming operations, which increases the demand for liquid ammonia, especially in Hubei Province. However, at the same time, most of the enterprises that have stopped or reduced their production of liquid ammonia are also starting to operate again or increasing their production levels, which will curb the rise in liquid ammonia prices. Given the above factors, there is still room for an increase in liquid ammonia prices, but the extent of such increases will be limited, and it will not provide sufficient support for urea prices. Secondly, with the overall operating rate of urea remaining high, a supply surplus may reoccur. Since the Spring Festival, the operating rates of domestic urea manufacturers have been rising steadily. With the agricultural sector coming back into activity, urea prices have continued to increase, which in turn has led to higher operating rates. According to statistics from China Fertilizer Network, the overall operating rate of the urea industry as of now is 57.47%, a significant increase compared to the period before the Spring Festival ； It is also understood that a few urea-producing enterprises in Inner Mongolia that had suspended operations have resumed production, and may reach full capacity next week ； Moreover, a new urea production capacity in the Jiangxi region is likely to come online by the end of the first half or the beginning of the second half of the year, while the upgraded facilities at a urea plant in Shandong will also resume operation during the first half of the year. Once again, the demands from workers and farmers come in turn, but the pace of these demands has slowed down. Driven by the demand in spring, the prices of various fertilizers have risen. Urea is gradually arriving in the agricultural markets at the grassroots level; meanwhile, the wholesale prices of urea that some traders stocked up on around the Spring Festival have turned negative, which certainly acts as a factor contributing to the current rise in prices” ； Purchases by large agrochemical suppliers are also in full swing, but they have largely entered the second phase of these purchases; subsequent restocking will likely be carried out as needed ； Some plywood factories in the Southern Market have seen some recovery in operations, and purchases of urea have increased ； Prices for compound fertilizer manufacturers are rising, and companies are gradually resuming production; overall operational activity is on the rise. Inventory levels of the raw material urea were low in the early stage, so procurement activities have accelerated and there is significant demand for replenishments. Given the slowdown in agricultural activities and the increase in industrial demand, the upward momentum in urea prices may weaken in the future. Finally, according to international reports, India may issue tenders for urea purchases in the middle of the month, which bodes well for China’s urea market. Additionally, the price of ammonium chloride, a type of small-scale nitrogen fertilizer, continues to rise, and supply remains generally tight; this provides certain support for urea. In summary, urea producers have a considerable amount of orders pending shipment, and both industrial and agricultural demand remains robust. Therefore, the main urea market continues to be influenced by positive factors. However, the high level of plant operations and their ongoing upward trend are factors that must be guarded against. As springtime demand gradually stabilizes and slows down, urea prices are expected to remain at high levels in the short term, though they will likely experience some moderation. The rise in ammonia prices is a positive development; however, this effect alone won’t last long without further support. (Tan Junying)