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The focus for urea is not on price increases Author/Source: China Fertilizer Network Date: 2020-04-13 Clicks: 7 Recently, the price of urea has stopped falling, and in many areas it has begun to increase. Urea, which had been experiencing continuous declines earlier on, is now one of the few fertilizer types in the market that is seeing price rises. In Shandong province, the standard ex-factory price for urea is 1700 yuan per ton (the same unit is used throughout). In Linyi, compound fertilizer manufacturers are purchasing urea at prices ranging from 1750 to 1760 yuan per ton. In Hebei province, the standard ex-factory price for urea is 1700–1720 yuan per ton, while in Henan it is 1700–1710 yuan per ton. In Shanxi province, the standard ex-factory price for urea is 1670 yuan per ton, with larger-grained urea costing 1710–1720 yuan per ton. Although the peak season for fertilizer use in spring has passed, and some large traders still claim that the recent increase in urea prices is driven to some extent by speculation, recent market data on new orders show that urea prices have at least stopped falling and stabilized. There are fewer new orders at low prices, and the situation regarding new orders has improved compared to earlier periods ； The downstream market believes that the main factors driving the speculation in urea this time are the arrival of the off-season for seasonal demand, as well as the fact that the market for high-nitrogen fertilizers has not yet entered its peak season; thus, demand provides relatively weak support in the short term. Additionally, urea manufacturers are still producing more than 160,000 tons per year, resulting in excessive supply pressure. These are the main reasons behind the recent rise in urea prices. First of all, market demand is indeed showing some signs. At present, the market demand at the grassroots level in Heilongjiang and Xinjiang has not yet fully emerged; there is still demand, though the volume is lower than before. The continuously falling prices of large-grained products from regions such as Inner Mongolia also indicate a lack of support for these products. However, in recent times, the demand for new orders in the markets of Jiangsu and Anhui has been increasing, and coupled with some export orders, low-priced products are gradually leaving the market. Additionally, due to the strong industrial demand at present, many large manufacturers have weekly order volumes of around 30,000 to 40,000 tons, which has helped to reduce the sales pressure on these companies. Secondly, use price increases to promote stability – buy when prices rise, not when they fall. As a bearish sentiment dominated the market earlier on, and urea manufacturers’ daily production reached 167,000 tons, some downstream users with demand chose to wait and see, fearing further price drops in the future. This led to increasing pressure on companies to sell their products. In order to reduce their inventory levels, some companies decided to lower prices further, creating a vicious cycle where lower prices deter purchases, and fewer purchases lead to even lower prices. With no positive factors entering the market, the announcement of tenders in India came as a relief. Although the quantity and prices specified in these tenders were not satisfactory from an industry perspective, they at least helped to ease the pressure on urea production. Additionally, increased sales of urea in the Jiangsu and Anhui regions prompted companies to take action. Although downstream users are currently less willing to pay higher prices, at least lower-priced products are gradually leaving the market, and there is also a greater willingness to conclude new deals. Stable shipments are of utmost importance for urea manufacturers operating at full capacity; whether urea prices can rise again is a matter of secondary concern. In summary, given the current situation, changes in the price of urea are not likely to have a significant impact on urea manufacturers; their main goal is to ensure that urea can be sold smoothly. Considering that market demand is currently at a moderate level, it is expected that unless there are additional tenders from India within this month, the increase in urea prices will not last long. Moreover, without strong demand, the potential for further price increases is likely to be limited. (Wu Wenchao)