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With urea prices rising so much, it’s like trying to have both fish and bear paws at the same time. Author/Source: China Fertilizer Network Date: 2020-04-13 Clicks: 8 Mencius said, “Fish is something I desire.”； Bear paws are also what I desire. You can’t have both; it’s like giving up fish to get bear paws. ”Some people will choose the bear’s paw, while others will choose the fish ； In such situations where it’s ultimately impossible to have it all, as is the case with the current urea market, price increases occur despite unfavorable market conditions. The result is either a decrease in shipments and the acceptance of further price drops, or modest price increases that aren’t significant. However, there are always reasons to drive up prices for urea; it’s impossible to have both fish and bear paws. Recently, the domestic urea market has seen fluctuations. Price increases were mainly observed in regions such as the Two Rivers area, Shanxi, Jiangsu, and Shandong, with increases ranging from around 10 to 40 yuan per ton. Although manufacturers have raised prices slightly on a tentative basis, there is still little demand at the retail level, resulting in a situation where goods are available but there is no market for them ； The areas where prices have dropped are in the northwest, southwest, and Inner Mongolia. Clearly, the urea price in Inner Mongolia has become the new area with low prices, with a drop of around 30–50 yuan per ton. Most traders remain pessimistic about the long-term trend of urea prices, so they adopt a cautious approach and purchase only as needed. As the weekend approaches, the average ex-factory price of urea in Inner Mongolia has dropped to around 1470–1510 yuan per ton. In Linyi, Shandong, the purchasing price of urea by compound fertilizer manufacturers has risen slightly to around 1750–1760 yuan per ton. As we move into mid-April, what will become of the urea market? Should one choose profit or stability? Firstly, the operating capacity of urea manufacturers remains high, and the situation of excessive production supply cannot be ignored. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises has dropped slightly to around 57.06%. Affected by the pandemic and the general economic situation, these enterprises continue to face significant pressures. In order to reduce production costs, they are likely to maintain a high level of operation, barring any unexpected developments ； Additionally, although the price of liquid ammonia at the local level has seen a slight increase, overall prices remain low. Compared to urea, companies will continue to prioritize urea production for now, so it is unlikely that there will be a significant reduction in the operating capacity of urea manufacturers in the short term. Secondly, there is insufficient follow-up on demand progress; it is the off-season for agriculture, and the industrial sector as a whole is relatively sluggish. In April, the agricultural market saw a lull in urea demand. Lacking support from major markets, it missed out on opportunities. Although wholesale prices in some local markets rose slightly, they are still viewed as bearish ； The procurement of large-scale agricultural supplies is just as responsive, following a model of purchasing as needed with quick and efficient operations. In the industrial sector, compound fertilizer manufacturers are carrying out the production of summer fertilizers; the overall operational rate of the industry is only slightly above 60%. The downstream market shows moderate acceptance and demand for compound fertilizers. Meanwhile, companies have shifted to a more moderate approach when purchasing the raw material urea ； The performance of plywood factories has been mediocre; overall production levels are average, and their purchases of urea are also limited. Finally, the market situation for ammonium chloride, a type of nitrogen fertilizer, has weakened, with prices falling to some extent. There is a risk that this downward trend could intensify in terms of both magnitude and scope. Therefore, it is possible that, in an effort to reduce costs, some compound fertilizer manufacturers may choose to use ammonium chloride instead of urea, which could lead to further slowdowns in the sales of urea and hinder any increase in its prices. However, when the negative factors are fully priced in, they turn into positives; meanwhile, some large urea manufacturers have plans to reduce production or shut down in the near future, which could lead to an increase in prices ； Additionally, according to international reports, India may issue new tenders by the end of this month, which could lead to speculation in the domestic market. In summary, the operating rates of urea manufacturers are relatively high, so any subsequent decline is likely to be limited. There is a lack of centralized purchasing for urea, industrial demand is limited, international urea prices are falling, and there are few opportunities for exports. It is expected that the urea market will remain in a state of consolidation in the short term, with limited fluctuations; however, a bearish sentiment prevails in the long term. (Tan Junying)