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Fertilizers: Stable supply, overall price increase Author/Source: Sinochem News Network Date: 2020-03-17 Clicks: 35 Fighting the epidemic during spring plowing – Part 2 on agricultural inputs and the market In recent days, in the face of the various impacts brought about by the COVID-19 pandemic, local authorities have introduced various measures to ensure smooth spring plowing activities. Fertilizer manufacturers, meanwhile, have continued with their production efforts while also working to combat the epidemic. At present, most fertilizer manufacturers have resumed operations, and transportation conditions have improved significantly, ensuring a sufficient supply of fertilizers for this year’s spring plowing. With a significant surge in demand, domestic fertilizer prices have seen widespread increases at present. Nitrogen fertilizers: Production has seen a significant rebound, while price increases have been limited. After the Spring Festival, the outbreak of the COVID-19 pandemic led to delays in business operations, and the situation regarding the supply of inputs for spring plowing this year has also become more challenging. According to monitoring by information agencies, on February 17, the operating rate of the urea industry across the country was 61.7%, with a daily production volume of 124,000 tons, which was 14,000 tons less than the same period last year. Fortunately, on February 20th, **16 departments including the National Development and Reform Commission issued the \"Notice on Ensuring the Production and Supply of Fertilizers for Spring Plowing in 2020,\" which called for ensuring the supply of raw materials needed for fertilizer production and creating preferential routes for the transportation of fertilizers. As a result, the production and distribution of fertilizers became smoother, and nitrogen fertilizer production rebounded rapidly. According to a survey by the China Nitrogen Fertilizer Industry Association, on March 3, the daily production of urea across the country was approximately 152,900 tons, with an operating rate of around 69.04%. Among these, urea manufacturers that use coal as raw material had an operating rate of 73.61%, an increase of 4.05% compared to the previous year; those that use natural gas or coke oven gas as raw material had an operating rate of 57.48%, an increase of 12.08% on a year-on-year basis. Industry experts believe that as the natural gas supply improves further, more urea manufacturers that use gas as a raw material in regions such as Xinjiang and Inner Mongolia will resume production. At the same time, some urea production plants that use coal as a raw material in regions such as Shanxi will also resume operations, and the daily national urea production volume is expected to reach around 160,000 tons in the future. Overall, there is basically no concern regarding the supply of nitrogen fertilizer for spring plowing this year. Zhong Weimin, chairman of Guangdong Yuexin Agricultural Supplies Co., Ltd., explained that after the Spring Festival, nitrogen fertilizer prices experienced significant fluctuations. Initially, prices dropped due to lack of confidence in the industry and disruptions in transportation. Starting from late February, however, the market saw a sharp rise driven by factors such as the need for fertilizers for winter wheat in the Huanghuaihai region, the demand for fertilizers for certain vegetables and fruit trees, preparations for spring plowing, and improved transportation conditions. Currently, the average ex-factory price of urea is around 1,800 yuan per ton; in Guangdong, the wholesale price of urea has risen to 1,940–1,960 yuan, an increase of over 100 yuan compared to early February. Zhong Weimin said that fertilizer prices are likely to keep rising in the coming period, but it’s not advisable to be overly optimistic. “Currently, there are actually quite a few bearish factors in the nitrogen fertilizer market. Firstly, international oil prices have plummeted. Due to OPEC’s failure to reach an additional production cut agreement, international oil prices plummeted by 10% on March 6, recording the largest single-day drop since December 2008. Most international nitrogen fertilizers are produced using natural gas as a raw material, and the price of natural gas is closely linked to oil prices; therefore, a sharp drop in oil prices cannot provide cost support for the nitrogen fertilizer market. Furthermore, due to disruptions in transportation during the Spring Festival, prices of agricultural products dropped significantly in many areas. In some regions of Guangdong and Guangxi, the purchase price of oranges fell below 1 yuan per jin, which affected farmers’ enthusiasm for planting and may have reduced the demand for nitrogen fertilizers. ”Zhong Weimin analyzed. Phosphatic fertilizers: Slightly reduced supply with moderate price increases. “Overall, the supply of phosphatic fertilizers has decreased slightly this year. However, taking into account factors such as declining exports and a slight drop in domestic demand, there will be a relatively sufficient supply during this year’s spring plowing season. Nevertheless, it is possible that certain areas may experience temporary shortages due to the impact of the pandemic.” ”Wang Ying, director of the Information Department at the China Phosphorus Fertilizer Industry Association, said. According to Wang Ying, phosphate fertilizer production in China is concentrated in regions with phosphate mineral resources such as Hubei, Yunnan, Guizhou, and Sichuan. Among these, Hubei accounts for 34% of the country’s total phosphate fertilizer output, making it the largest producing province. Affected by the pandemic, the operation rate of phosphate fertilizer manufacturers in Hubei declined, but that in other major producing provinces increased compared to previous years; the overall industry operation rate was slightly lower than it was during the same period last year. Among them, the operation rate in the monoammonium phosphate industry was 60%, 5 percentage points lower than the same period; the operation rate in the diammonium phosphate industry was 80%, 5 percentage points higher than the same period. “During the pandemic, phosphate fertilizer production in Hubei decreased by several hundred thousand tons. However, to ensure an adequate supply of fertilizers for spring plowing, the entire industry is making every effort to arrange production, even restarting some idle facilities in order to continuously increase the operational rate. ”Wang Ying said that however, enterprises still face issues such as difficulties in transporting raw materials and inputs, obstacles in exporting finished products, high product inventory levels, as well as increased pressure on manpower and capital, all of which raise the production costs of phosphate fertilizers. Regarding diammonium phosphate, Fang Bian, chairman of Wengfu Group Agrochemicals Co., Ltd., said that several large companies such as Guizhou Phosphorus Chemical Group and Yuntianhua are delaying their export orders in order to ensure domestic supply. Currently, the price of 64% diammonium phosphate is seeing a moderate recovery-driven increase. Last spring, the arrival price of diammonium phosphate in Heilongjiang was 2,900 yuan. Now, due to the impact of the pandemic, the logistics cost per ton has increased by 50–80 yuan, while the local arrival price of diammonium phosphate is around 2,400 yuan. Compared to last year, there is still some room for an increase in the price of diammonium phosphate. Overall, the supply and demand for DAP in China’s spring plowing season are in balance. It is understood that due to the impact of the epidemic in Hubei, there was a shortage of monoammonium phosphate in the early stage. However, as enterprises resumed production one after another after March 10, this will have little impact on the monoammonium phosphate market in the short term. Starting from the early to mid-February, there was a significant upward adjustment in the prices of monoammonium phosphate; currently, the mainstream ex-factory price for 55% monoammonium phosphate is 2,000 yuan. Regarding the future trend of the ammonium phosphate market, Zhai Shuxin, deputy general manager of Yunnan Yuntianhua Agricultural Inputs Chain Co., Ltd., believes that compared with the same period last year, the price of ammonium phosphate remains 150–180 yuan lower, while the price of powdered ammonium phosphate is even lower on a year-on-year basis. As the pandemic improves, enterprises in Hubei will gradually resume production, and the price of monoammonium phosphate is likely to stabilize; however, there is still a possibility of a price increase of 50 to 100 yuan. “Overall, the increase in the price of monoammonium phosphate is not caused by the pandemic; rather, it is a result of the market returning to more rational pricing. ”Zhai Shuxin said. Potash fertilizers: Highest supply guarantee, with local price increases. This year, there is the highest level of supply guarantee for potash fertilizers during the spring planting season. Industry experts analyze that there are mainly three reasons: first, the production of potash fertilizers saw the highest increase last year. Last year, China produced a total of 7.622 million tons of potash fertilizer, an increase of 11.7%, representing the highest growth rate among all types of fertilizers. Secondly, potassium fertilizer production in our country is mainly concentrated in Qinghai and Xinjiang, and it has been less affected by the pandemic. On February 26, Golmud Zangge Potash Fertilizer Co., Ltd. resumed production in full capacity. With this, all three of the country’s major potash fertilizer manufacturers with annual production capacities of over one million tons have restarted operations, providing strong support for spring farming activities. Third, the import volume is large. Last year, China imported a total of 9.08 million tons of potassium chloride in terms of physical volume, representing a 21.7% increase compared to the previous year. Currently, the inventory of potassium fertilizers at ports exceeds 2 million tons, which can serve as a supplement to the domestic supply of such fertilizers. In terms of demand, according to surveys by the agricultural department, the demand for potassium fertilizer for spring plowing is around 1.5 million tons (in pure form). The domestic production, combined with imported potassium fertilizer, is more than sufficient to meet this demand. Du Shuangjiang, an analyst at China Fertilizer Network, explained that due to strong demand in the spot market, during the first week of March, the price of 60% red large-grained potassium chloride at the Bayuquan Port in Liaoning rose to around 2,400 yuan, while the price of white powdered potassium chloride increased to around 2,270 yuan. Meanwhile, the deliveries related to border trade before mid-March have been scheduled. Due to the significant price increase, importers have stopped selling and are waiting to see how things develop. The prices of domestically produced potash fertilizer in Qinghai remain stable for now; in some areas, the delivery speed cannot keep up with demand, so sales have been suspended temporarily, with priority given to fulfilling existing orders. Additionally, international potassium chloride market prices have declined slightly, and it is expected that negotiations for large-scale contracts in China may be postponed until the third quarter at the latest. Overall, if large-scale contracts cannot be signed as soon as possible, the upward trend driven by rising prices of large-grained potassium chloride in the Northeast will continue to spread. Regarding potassium sulfate, price increases in the market are mainly seen in the northern regions where prices are relatively low. At present, in the northern market, the actual ex-factory price of 52% fully water-soluble potassium sulfate powder in Mannheim has risen to around 2700 yuan; in the southern market, due to higher prices earlier on, the price remains stable at around 2800 yuan for now. Affected by the rise in potassium sulfate prices in Mannheim, the price of potassium sulfate in the water-salt system remains stable for now. In the future, it is expected that, after remaining at these levels for a certain period, prices will continue to rise, depending on production levels and cost factors. Compound fertilizers: Demand is gradually increasing, keeping prices stable. Among fertilizer manufacturers, 69% of urea producers have resumed operations, 62% of monoammonium phosphate producers have done so, 61% of diammonium phosphate producers have resumed work, 88% of potash fertilizer producers are back in operation, and 51% of compound fertilizer manufacturers have resumed operations. Based on the current situation, there is assurance that the demand for compound fertilizers for spring plowing and preparation will be met. ”Pan Wenbo, director of the Planting Management Department of the Ministry of Agriculture and Rural Affairs, said at a press conference held recently by the State Council’s Joint Prevention and Control Mechanism. It is understood that this spring, the fertilizer market deviated from its usual pattern, with price increases taking precedence. Driven by multiple positive factors, the market for compound fertilizers is showing a gradual recovery trend, and prices are expected to rise slightly in the short term. Currently, the mainstream ex-factory price of 45% chloro-based compound fertilizers across the country ranges from 1,900 to 2,000 yuan, while the mainstream ex-factory price of 45% sulfur-based compound fertilizers ranges from 2,050 to 2,200 yuan. “The demand for compound fertilizers for spring plowing is gradually increasing, resulting in a positive sales atmosphere in the market. Logistics and production activities in low-risk areas have seen significant improvement compared to earlier periods. Coupled with the implementation of policies aimed at ensuring the continuation of spring plowing and the transportation of fertilizers, the operation rate of compound fertilizer manufacturers will continue to rise, and market prices will remain strong in the short term. ”Zhou Yixin, chairman of Hubei Maosheng Biology Co., Ltd., analyzed that compound fertilizer manufacturers have been fulfilling orders that were pending before the New Year recently, and there are many new orders coming in. In particular, the demand for fertilizers for wheat in the Central Plains region and for spring corn fertilizers in the Northeast region has increased significantly, which makes it inevitable for the prices of compound fertilizers to rise. Li Yuxiao, the marketing director of Kim Jong-dae Group, said that the cost per ton of compound fertilizer has increased by around 100 yuan at present, and prices of compound fertilizers in China have also risen slightly. However, this is far from enough to offset the cost increases resulting from rising raw material prices, and it is expected that there will be further slight increases in the prices of compound fertilizers in the future. Liu Gang, vice president of Stanley Agricultural Group Co., Ltd., believes that rising prices for compound fertilizers will continue for some time, but the increase won’t be significant. “Currently, domestic grain stocks are abundant, so the possibility of significant price increases is low. Looking at the domestic situation, a rise of around 150 yuan in the price of nitrogen fertilizers is not a major issue. The supply of phosphorus fertilizers in Hubei is expected to improve within a month, and there might be a surge in demand later on, but prices of phosphorus fertilizers are not likely to rise significantly. Internationally, most phosphate fertilizers come from Morocco and Saudi Arabia; these two countries increase their production of ammonium phosphate by around 1 million tons per year. Globally, the supply of phosphate fertilizers increases by 1.5 million tons per year. A significant rise in the price of phosphate fertilizers is unlikely, unless the pandemic spreads on a large scale, in which case it could have a substantial impact on the production of ammonium phosphate. However, at present the epidemic situation in these two countries remains relatively stable, phosphatic fertilizer production will continue to be steady, and there is little possibility of a significant rise in the prices of compound fertilizers in the future. ”Liu Gang analyzed.