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Is a price war over high-nitrogen fertilizers about to begin? Author/Source: China Fertilizer Network Date: 2020-04-13 Clicks: 8 In the warm months of March, all things come back to life. Just like the climate, the fertilizer market has been showing signs of recovery recently. Although this spring’s market period was relatively short, the trading atmosphere was no less active than in previous years at the same time. As of now, most areas in the north have reached the final stages of the buying season, with only occasional orders for replenishment remaining at the retail level. The southern regions are also nearing the end of this period. The summer fertilizer market is highly anticipated, and in some areas, the demand for high-nitrogen fertilizers is already quite strong. As of the end of this week, most compound fertilizer manufacturers have released their prices for 40% chlorinated high-nitrogen corn fertilizers (such as 28-6-6 or 30-5-5). The current price range remains at 1800–1920 yuan per ton. Although this is lower than the 1950–2100 yuan per ton seen during the same period last year, given the current cost of raw materials at 1497–1502 yuan per ton, this price level might still be considered high. In the face of intense competition in the market going forward, will the high-nitrogen fertilizer market continue to experience price wars, or will there be a way out and some improvement? First, cost fluctuations. With higher fertilizer prices and clearer preferential policies, the market may see further momentum in its early stages, yet concerns over price wars are on the rise. In terms of raw material costs, there is a high likelihood of fluctuations in these costs in the future. Although the price of urea remains strong for now, factors such as limited domestic demand and a weak international market may lead to downward price trends in the long run ； The price of monoammonium nitrate is on a downward trend. Plant operating rates are recovering rapidly; some companies have few orders left to fulfill, which increases sales pressure. Additionally, demand for monoammonium nitrate in summer fertilizer production is limited, so the outlook for this product is negative ； In terms of other costs, since the implementation of the policy exempting all vehicles from tolls on national highways, road transportation has benefited significantly, which has also helped to reduce the cost pressures on fertilizer manufacturers to some extent. Secondly, the demand outlook. After the spring fertilizer market came to an end, many companies and distributors reported that sales of compound fertilizers during the spring planting season were lower compared to the same period last year. Apart from the relatively significant stagnation in the market due to the pandemic, there were also fluctuations in farmers’ enthusiasm for planting. One factor was the adjustment in planting patterns; in the Northeast region, for example, Heilongjiang Province provided a subsidy of 200 yuan per mu more for soybean cultivation in 2020 than for corn, which led to a sharp increase in the area dedicated to soybean planting, resulting in a decrease in sales of sulfur-based compound fertilizers that are normally used for corn cultivation ； Secondly, there has been a widespread emergence of rural planting cooperatives; some large-scale growers can purchase fertilizers and pesticides directly from factories. A centralized purchasing and selling model has become popular, which allows them to avoid intermediaries and, to some extent, reduces their consumption of fertilizers. Finally, the supply level. The main reason for the collective rise in fertilizer prices at the beginning of March was supply issues; production and shipment by companies in most areas were almost paralyzed. With the arrival of the spring demand season, it became difficult to find supplies, which naturally led to rising prices. As the epidemic situation has been effectively brought under control in various regions, enterprises have gradually resumed normal production activities. As of this weekend, the overall operational rate of large-scale compound fertilizer manufacturers across the country was around 63%, remaining at a high level for several weeks in a row. Although companies are currently finalizing the execution of orders that were placed in the spring, and there are limited such orders left, most of them have not significantly reduced their production levels. Instead, they are shifting to the production of high-nitrogen fertilizers and building up inventory. It seems that the supply of fertilizers during the summer period will be relatively smooth. In summary, at present the prices of high-nitrogen fertilizers remain relatively stable, and various preferential policies have been introduced by companies. It is expected that from mid to late April, the market for high-nitrogen fertilizers will see its first wave of increased activity. If there are no significant changes in raw materials or supply and demand, the prices of these fertilizers will also remain stable. However, price cuts to attract customers in the final stage are inevitable. (Feng Hongyang)