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Urea Prices Finally Drop; Market Faces Challenges Author/Source: China Fertilizer Network Date: 2020-04-22 Clicks: 8 In late April, the spring fertilizer market entered its final phase, with only limited restocking needs in various regions, resulting in little possibility of significant price fluctuations. Turning to summer fertilizers, companies across the country are currently introducing relevant pricing options and incentives on a tentative basis. Taking 40% (28-6-6/30-5-5) chlorinated compound fertilizers as an example, their standard selling price is between 1,800 and 1,950 yuan per ton. Although this price is slightly lower compared to the same period last year, it remains somewhat high when considering the cost of raw materials, which is 1,490 yuan per ton. Not only does the urea market influence the price trends of high-nitrogen fertilizers, but it also affects the overall development of the fertilizer market to a certain extent. Recently, the urea market has been weak, with prices dropping in some areas. However, when it comes to potential positive factors in the future, there are hardly any. One such factor is the limited domestic demand; in the northern regions, top-dressing for field crops is usually ordered along with the base fertilizer, and deliveries occur gradually based on prior payments. There is not much new supply, and coupled with low production rates in industrial enterprises, domestic demand remains weak ； Secondly, supply increases while exports are hindered. Recently, the daily production volume of urea in the domestic market has been around 160,000 tons, resulting in an ample supply. Coupled with weak demand in international markets and a sluggish export market due to the worsening global pandemic, the price of urea in the domestic market has come under pressure and declined. The prospects for urea are not promising; aside from the negative impacts on the market for high-nitrogen fertilizers, the market for water-soluble fertilizers, which are also a type of finished fertilizer, faces similar difficulties. Firstly, there is insufficient cost support. Compared to compound fertilizers, the raw materials required for the production of water-soluble fertilizers are relatively more expensive, which is also the main reason for the higher pricing of such fertilizers. At present, the fertilizer market as a whole is in a state of decline. Although the price of potassium dihydrogen phosphate, one of the key raw materials needed for producing water-soluble fertilizers, shows signs of improvement, the ex-factory price in Sichuan’s main production areas remains at 6,800–6,900 yuan per ton. Fluctuations in the price of yellow phosphorus, along with difficulties in the export market, are preventing an increase in the price of potassium dihydrogen phosphate. With weaker cost support, although the ex-plant prices of water-soluble fertilizers have not seen widespread adjustments, the discount levels offered for new orders have mostly narrowed. Secondly, seasonal demand is a concern. Generally, spring and summer are the key periods when demand for water-soluble fertilizers increases significantly. With the gradual expansion of the area dedicated to cash crop cultivation in various regions in recent years, water-soluble fertilizers are being used in an ever wider range of applications, and their consumption is also on the rise. Unlike in previous years, the fertilizer market has shown clear signs of lag this spring; production and shipping at the upstream level have been strained, and some companies have even restricted the acceptance of new orders, which has had a negative impact on overall sales. At present, the use of water-soluble fertilizers this summer is also set to decrease. One reason for this is the reduced willingness among farmers to cultivate crops, which will inevitably lead to a decline in the area dedicated to the cultivation of certain economic crops ； The second reason is the increasing practice of crop rotation; in some areas, the available arable land is already limited, and with more crop rotation, fertilizer usage may decrease. Finally, a cold winter in export markets. At present, the international fertilizer market is volatile. Due to the ongoing impact of the pandemic, import and export activities in most ** and regions have been disrupted. As for water-soluble fertilizers specifically, in addition to domestic demand, export demand also accounts for a significant proportion; in fact, some coastal companies focus primarily on export business. The weakening demand for water-soluble fertilizers will, on the one hand, increase the purchasing and selling pressures on companies; as inventory levels keep rising while demand grows slowly, this will force companies to reduce prices in order to promote sales ； On the other hand, this will hinder the orderly development of the domestic market. With a downturn in exports, companies will turn their attention to the domestic market, which is likely to lead to price wars and also provide an opportunity for fake products to emerge. In summary, it is expected that the fertilizer market will face numerous challenges during the summer. Although demand for water-soluble fertilizers in some areas may just manage to sustain market prices, if raw material prices remain low in the future, then water-soluble fertilizers will also have to make concessions in terms of their selling prices. (Feng Hongyang)