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The focus for urea is not on price increases Author/Source: China Fertilizer Network Date: 2020-04-15 Clicks: 46 Recently, the price of urea has stopped falling, and in many areas it has started 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 applies elsewhere). 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; therefore, 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 demand in the grassroots markets of Heilongjiang and Xinjiang has not yet been fully realized; while there is still some demand, its volume has decreased compared to earlier periods. The declining prices of large-sized granules in regions such as Inner Mongolia also indicate insufficient market support. However, recently, the demand for new orders has been steadily increasing in markets around Jiangsu and Anhui. Coupled with the boost from certain export orders, low-priced products are gradually disappearing from the market. Additionally, due to strong industrial demand, many major manufacturers currently have weekly pending orders amounting to 30,000–40,000 tons. As a result, the sales pressure on these enterprises has been alleviated to some extent. Secondly, use price increases to promote stability – buy when prices rise, not when they fall. Due to the prevailing bearish sentiment in the market earlier on, and with urea manufacturers producing 167,000 tons per day, even some downstream users who had demand were waiting to see what would happen, fearing further price drops in the future. This led to increasing pressure on manufacturers 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 deterred purchases, and fewer purchases led to even lower prices. There were no positive factors driving the market at that time. However, with the recent tenders in India, although both the quantity and prices offered were not satisfactory from an industry perspective, they at least helped to reduce 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; compared to this, whether urea prices can rise again is a matter of secondary concern. In summary, given the current situation, fluctuations in urea prices 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 relatively low at present, it is expected that unless there are additional tenders from India within this month, the increase in urea prices will not last long. Moreover, due to the lack of strong demand, the potential for further price increases is likely to be limited. (Wu Wenchao)