Urea has no chance of a turnaround; will high-nitrogen fertilizers see price cuts?

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Urea has no chance of a turnaround; will high-nitrogen fertilizers see price cuts? Author/Source: China Fertilizer Network Date: 2020-04-07 Clicks: 7 In the blink of an eye, the spring fertilizer market is coming to an end; both upstream shipments and downstream demand have slowed down, especially in most areas of the north, where there is only a small amount of demand for replenishments. This year’s spring plowing season saw a rather rapid market activity. Driven by the rising prices of raw materials earlier in the period, the prices of compound fertilizers increased during spring, by nearly 100 yuan per ton compared to the level before the Spring Festival, which in turn boosted trading activity in the spring compound fertilizer market. The spring compound fertilizer market passed by in a flash, and the summer high-nitrogen fertilizer market gradually emerged. Compared to the spring situation, the price trends of high-nitrogen fertilizers are of particular interest. Although some companies have already set tentative prices, the mainstream ex-factory price for 40% (28-6-6/30-5-5) fertilizers ranges around 1850–1900 yuan per ton. However, future trends and any related incentive measures remain unclear. Given the currently sluggish atmosphere in the overall fertilizer market and end-user markets, there are rumors that prices of high-nitrogen fertilizers may tend to fall in the future. First, the raw material market situation. Following the surge in prices during spring, recent raw material prices have come as a huge surprise. The urea market remains stagnant; there is insufficient demand from domestic industrial and agricultural sectors, the specific details of Indian orders have not yet been finalized, and the overall market sentiment is pessimistic. An improvement is not expected in the short term ； Summer fertilizers are mainly high-nitrogen types; companies have less demand for ammonium sulfate as a raw material, resulting in poor performance in new orders, and the ammonium sulfate market remains in a weak state ； The potassium fertilizer market is weak; the price of potassium chloride is on the decline. It is expected that the market will remain sluggish and quiet until large-scale contracts for potassium fertilizers are signed. As a result, in terms of raw material costs, high-nitrogen fertilizers have little supportive factor, and their prices are also likely to remain weak. Secondly, downstream demand. Taking the spring compound fertilizer market as an example, although the prices of such fertilizers rose compared to the same period last year, many distributors reported that overall sales volumes were lower than in previous years. One reason for this is the limited enthusiasm among farmers for planting; due to the impact of the pandemic, agricultural activities were halted in some areas for a while. The surplus of agricultural products in the southern regions where economic crops are grown has reduced farmers’ incomes to some extent, which in turn has diminished their enthusiasm for planting ； The second reason is the prevalence of local large-scale farming cooperatives, along with an increase in centralized purchasing and sales. Due to the large amounts of fertilizer required, large-scale farmers can deal directly with manufacturers, eliminating the need for intermediaries; as a result, activity in the end-market for compound fertilizers has declined. Finally, upstream supply. Since early March, the operating rate of compound fertilizer plants has shown an upward trend. According to Zhongfei Net, as of this weekend, the overall operating rate of large-scale compound fertilizer manufacturers across the country was around 66%. Although it has declined compared to the previous two weeks, it remains at a relatively high level. The spring fertilizer market is nearing its end; the orders placed in advance have been largely fulfilled. There are few new orders for summer fertilizers, and some companies have reduced their production levels in preparation for the prices and policies related to summer fertilizers. Given the weak conditions in the raw material market at present, it is expected that companies will also lower their production rates over the next one or two weeks. However, as market demand increases, the supply situation upstream is likely to improve soon. In summary, the spring compound fertilizer market has not yet come to an end, and prices and preferential policies related to high-nitrogen fertilizers are already attracting significant attention. The tentative quotes provided by companies do not reflect future price trends. Considering the conditions regarding raw materials as well as supply and demand, it is expected that prices of high-nitrogen fertilizers will tend to stay stable or decline in the coming period. (Feng Hongyang)