Thread Content
Demand for raw materials drives second round of price increases for compound fertilizers? Author/Source: China Fertilizer Network Date: 2020-03-16 Clicks: 7 After a period of \"downturn,\" the spring fertilizer market is on the verge of revival. Both suppliers and end-users seem to have been building up momentum for some time now. Currently, the fertilizer market is showing signs of recovery, characterized by rising prices, increased demand, and restored supply. It is important to note that these price increases apply to almost all types of fertilizers, with relatively large rises in prices, which has helped to boost activity in the fertilizer market. According to Zhongfei Net, as of this weekend, the main ex-factory prices for 45% chlorine-based/sulfur-based general-purpose compound fertilizers across the country ranged from 1,950–2,050 yuan per ton and 2,150–2,350 yuan per ton respectively, representing an increase of nearly 100 yuan per ton compared to the period before the Spring Festival. This shows that the market price of compound fertilizers is indeed supported by raw material costs and downstream demand. Many market reports indicate that prices are likely to rise further in the short term, with some companies even claiming that there will be another price increase. But will this actually happen? First, the rise in raw material prices has slowed down. The main reason for the recent rise in the prices of compound fertilizers is the increase in the costs of their raw materials. According to data from Zhongfei Net, the pure raw material costs for the 45% chlorine/sulfur-based general-purpose series across the country are currently 1,682 yuan per ton and 1,967 yuan per ton respectively, representing an increase of over 100 yuan compared to the period before the Spring Festival. However, as the upward trend in raw material prices has slowed down at present, it is unlikely that compound fertilizer prices will continue to rise. Domestic agricultural demand for urea is declining, industrial demand remains relatively stable, and prices have softened in some areas ； The supply of monoammonium has recovered, while demand from downstream users has declined; as a result, transaction prices are showing a downward trend. Therefore, the expectation that raw material conditions will support compound fertilizer prices in the future is relatively weak. Secondly, terminal demand is limited. Against the backdrop of the full-scale start of the spring plowing season, the compound fertilizer market is booming, with some companies reporting that demand exceeds supply in certain areas, forcing them to limit new orders. On the surface, the end-market has indeed become more active, with the pace of goods circulation accelerating. However, in reality, most companies are still processing previous orders at present, and new orders are being placed in limited numbers. One reason for this is that there was a surge in purchasing activity in some areas just before the Spring Festival, leaving relatively little demand after the festival. The second reason is that although the prices of chemical fertilizers have risen overall, the increase in the price of diammonium fertilizer has been limited compared to other types of fertilizers; this has, to some extent, dampened downstream demand for compound fertilizers. Finally, upstream supply is increasing. In addition to raw material prices and downstream demand driving up the prices of compound fertilizers, the recent shortage of supply at some factories has also played a role in this trend. However, as enterprises across the country resume operations one after another, the overall operational rate of large-scale compound fertilizer manufacturers nationwide has risen significantly to 62% as of this weekend, and it is expected to continue to increase in the coming week. The gradual increase in corporate production rates not only ensures timely delivery of existing orders but also allows for an appropriate increase in inventory levels to prevent a surge in demand from downstream clients at the end of the spring market season. As a result, concerns about tight supplies and rising prices may diminish in the future. In summary, the market for compound fertilizers is seeing active development in the spring. After a round of modest price increases, there are still strong calls for another round of price hikes. However, considering the factors related to raw materials as well as supply and demand trends, it is unlikely that compound fertilizer prices will rise again. (Feng Hongyang)