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Urea prices drop while volume remains stable; ammonium chloride shows no sign of competing fiercely. Author/Source: China Fertilizer Network Date: 2020-04-07 Clicks: 7 A printing order did not bring any substantial improvement to the weak domestic urea market; manufacturers still lack the confidence to drive up prices, and the downward trend in urea prices has not stopped yet. With the bulk purchases by large traders completed, only occasional purchases are made as needed, and a price battle in the market is on the verge of breaking out； In some factories, such as those in Inner Mongolia, the price of urea is being collected in advance on a provisional basis, as part of a sales strategy aimed at ensuring a minimum revenue ； Urea sees price cuts while maintaining volume; ammonium chloride, another nitrogen-based fertilizer, remains at high prices at the end of the spring market, unlike urea, and does not intend to compete in this final phase of the spring market. Currently, the urea market in China is sluggish due to an overproduction situation. According to statistics from China Fertilizer Network, the overall operational rate of urea production enterprises as of now is 57.86%, with a daily production volume of around 162,400 tons ； At the same time, due to an oversupply of liquid ammonia, as well as issues related to profitability and storage, some companies may shift their production focus to urea, which could lead to an increase in the operational capacity of urea manufacturers. On the demand side, overall conditions have weakened; the agricultural market is in its off-season, with wholesale supplies available but no buyers, while large agrochemical suppliers purchase as needed ； The production of industrial compound fertilizers in spring has entered its second half; there is little enthusiasm for producing high-nitrogen fertilizers in summer, the amount of urea purchased as raw material is limited, and the demand from plywood factories is also limited. There is an overall surplus of urea, confidence is low, and prices are still likely to continue falling; therefore, it is unlikely that ammonium chloride can remain unaffected – it is only natural that it will be impacted as well. However, the price of ammonium chloride in the domestic market remains high at present; there is an ample supply of orders awaiting shipment, and delivery of existing stock is in short supply. Yet, new orders are significantly fewer compared to earlier periods, with a few smaller manufacturers lowering their prices, and the transaction prices of some larger manufacturers having seen a slight reduction. Currently, the prevailing delivery price for wet ammonium in the Central China region is around 550 yuan per ton, while the prevailing price for dry ammonium is around 650 yuan per ton. The delivery price for dry ammonium from some sources outside the region, arriving via rivers, is also around 650 yuan per ton ； In the East China region, the standard ex-plant price for wet ammonium is around 480–520 yuan per ton, while the premium grade costs 540–550 yuan per ton. As for future trends, the following factors need to be taken into consideration. Firstly, the high operating levels of caustic soda manufacturers are one of the main concerns for the future. According to statistics from China Fertilizer Network, as of now the overall operational rate of soda ash manufacturers in the industry is 78.1%, with a daily production volume of around 38,900 tons. Due to the weak market conditions for soda ash, these companies face significant pressure regarding their production costs. If they stop production for maintenance, this pressure only increases. Additionally, there are plenty of orders pending fulfillment, so their willingness to produce remains high, and there is little likelihood of a significant drop in production levels. However, some large manufacturers plan to carry out maintenance work next week or in May, which will reduce the supply of goods available on the market to some extent. Secondly, demand is slowing down, resulting in a decrease in new orders for ammonium chloride manufacturers. Affected by the pandemic, traders and compound fertilizer manufacturers were suspected of engaging in panic buying earlier on; however, this trend of bulk purchasing has now dissipated. Currently, the ammonium chloride supply in the downstream market is sufficient, and production and sales have entered their second phase. The amount of new orders being placed is limited, especially as demand in the Northeastern market enters its final stage, resulting in weaker transaction volumes. Some traders say that there is significant sales pressure at the Bayuquan Port, and prices are declining ； Moreover, the production progress of high-nitrogen fertilizers is slow, and compound fertilizer manufacturers lack enthusiasm for production, resulting in a slight decline in operational activity. Additionally, given the unfavorable economic conditions, the weakening demand for compound fertilizers could lead to a drop in demand for ammonium chloride. Traders are cautious in their operations, preferring to purchase as needed, which results in a lack of bulk purchasing in the market. Once again, the urea market is sluggish with prices falling; it holds an advantage over ammonium chloride in the summer fertilizer market and will therefore be more favored. Ammonium chloride is likely to follow urea’s path in the future. Finally, aside from the aforementioned negative factors, ammonium chloride also has favorable supporting factors, and discussing price cuts is a consideration from a long-term perspective. At present, ammonium chloride manufacturers have a sufficient amount of orders pending shipment, and delivery is delayed; shipments are generally not available until around mid-April, which keeps prices high ； Additionally, some large companies also have maintenance plans scheduled for the near future ； If the cost pressures on caustic soda manufacturers increase in the future, it is possible that they may be forced to shut down their operations. In summary, an adequate supply of products ready for shipment and tight shipping conditions are factors that benefit ammonium chloride manufacturers; prices are also unlikely to drop sharply in the short term, and they will remain at high levels. There is no need to engage in fierce competition during the latter part of the spring market” ； However, due to declining demand, the negative impact of weak urea prices, and competition for market share, there are significant concerns regarding the price of ammonium chloride around late April; prices are likely to see a wider range of fluctuations or even a slight decline. (Tan Junying)