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Urea prices are still falling – will they rise in April? Author/Source: China Fertilizer Network Date: 2020-03-30 Clicks: 91 As late March approaches, the price of urea has fallen over the past half month, with a cumulative decline of 100–160 yuan per ton, and there are signs of further drops. It should be noted that the fertilizer market in spring has not yet come to an end, and compound fertilizer manufacturers are already preparing to produce fertilizers for the summer. In previous years, at this time, the price of urea either kept rising or saw only minor drops amidst an overall upward trend; yet now, the price of urea is experiencing a significant decline! It can be said that the flowers remain the same from year to year, yet the urea changes with each passing year! Urea prices are still falling – what is the reason? Will urea prices rise in April? On the one hand, domestic and international demand is hindered in the short term. In the domestic trade sector, the resumption of industrial activities has reached a certain stage; the same is true for the production of fertilizers for spring use. With spring planting approaching in the northeast, northwest regions, local suppliers have either already purchased compound fertilizers or are urging manufacturers/distributors to deliver them. As a result, the average operating rate of large compound fertilizer manufacturers dropped by 6 percentage points on a weekly basis, to around 67.25%. Correspondingly, domestic industrial compound fertilizer companies have slowed down their purchases of urea ； There’s also the usual argument that due to the poor economic situation, industrial power plants and plywood factories will order less urea compared to previous years ； The key point is that there is already a large supply of urea at the grassroots level; with stock available, there’s no need for panic. Dealers will have to wait some time before making their next purchases, probably until mid-April or even later. Exports: International urea prices have fallen for two consecutive weeks; the ex-ship price of urea in Egypt/North Africa has dropped below $240 per ton ； The new procurement tender issued by India on March 22 has faced delays; the cost of 14 days of quarantine is high. Most ports along India’s east coast remain closed until March 31 (since our country is located near the east coast, shipping goods to the west coast would incur additional costs). A nationwide lockdown in India will take effect at 00:00 on March 25 and last for 21 days, among other challenges. It remains to be seen whether the bidding process will be completed as scheduled on March 30, and whether our country will be willing to compromise on prices in order to win the contract for large quantities of urea ； China’s offshore asking price is over $250, but I’ve heard that prices below $245 could be considered. At $245, the port price amounts to only 1,725 yuan; after deducting around 50 yuan for various port fees and the corresponding shipping costs, the price equivalent to the factory price at urea manufacturers in my country is truly very low. On the other hand, there is an excess supply. Since early March, the daily production has been 160,000 tons; recently it has reached 163,000 tons per day. In the short term, apart from one factory resuming operations and another having some of its equipment repaired, daily production will remain at this high level ； Road transport is fast and cost-effective; buyers in both the industrial and agricultural sectors prefer not to place orders too far in advance. There is also a tendency toward pessimism. It is uncertain whether export volumes will increase. Demand from industry is declining; while demand remains stable and production levels are high, the overall economic situation is poor. Urine cannot stand out in such conditions, and buyers are pessimistic about future market trends and approach purchases cautiously. Having said all that, will urea prices still rise in April? If it rises, when might that be? First of all, the demand still exists. In the industrial sector, some compound fertilizer manufacturers have already begun producing summer fertilizers. As is well known, summer fertilizers are mainly high-nitrogen compound fertilizers; why such an early start? During spring and summer, compound fertilizer manufacturers in Hubei operate at reduced capacity, so manufacturers in other regions naturally have to produce more compound fertilizers in order to capture this market share ； The south is about to experience high temperatures, and industrial power plants will also need to purchase urea to some extent. As the epidemic situation improves domestically, industrial plywood factories will consider resuming operations to an appropriate extent based on the sales of their finished products. In the agricultural sector, goods will be available sooner or later. Considering that summer corn is sown in the original regions in early June, as well as second-season crops in the southwest and southeast, fertilization is carried out in the northeast and northwest in mid-June. Toll collection is likely to resume at full speed by the end of April, and with a delivery time of around two weeks, distributors need to plan for their next round of purchases by the end of April at the latest. Due to exports and the shutdown of urea production plants in India, which is a major agricultural country, the amount of urea requested for procurement this year is likely to be much higher than in previous years. Although disasters such as locust plagues may still occur, the pandemic has led many countries to restrict the export of agricultural products; as a result, India has no choice but to import more urea for use in domestic farming ； In the short term, China’s urea industry will have to sacrifice prices in order to increase exports; in the long run, exports from China should increase, and export prices are likely to boost domestic market prices as well. Secondly, supply will decrease. Mid-April onward is the usual maintenance period for urea manufacturers; although it may be delayed, some companies have been operating at high capacity for a long time, so there is a possibility of temporary shutdowns. Especially if tolls on highways are reinstated after the end of April, the cost of purchasing goods will increase, and dealers may order urea in advance for the summer. Once again, price increases require a supportive atmosphere. It could be that there is a large quantity of urea available at low prices waiting to be shipped, or that once exports become the main source of supply, domestic supply becomes tighter; it might also be that industrial buyers concentrate their purchases at certain times, or perhaps various agricultural supply companies need to place new orders for supplies. Finally, urea prices may rise in April, possibly in the middle of the month or a little later. A catalyst is needed for this increase; it depends on when demand emerges and on the available stock of urea. However, until then, urea prices will continue to fall, and they are likely to drop below the lowest levels seen before the New Year. (Cheyan Hong)