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How should one strategize if urea prices are expected to rise? Author/Source: China Fertilizer Network Date: 2020-04-23 Clicks: 14 Some readers, upon seeing this title, may wonder why discussions about price increases are being raised now, given that urea prices have only dropped in the past two or three days. It should be clearly stated here that as mentioned in the previous article on China Fertilizer Network, the decline in urea prices this time is likely to be greater than the previous increases, and prices could drop to their lowest levels since the beginning of the year; this view remains unchanged ； This article mainly discusses how manufacturers should plan their strategies if urea prices are expected to rise in the future In other words, something needs to be done to drive up urea prices in the future. First, acquire orders as much as possible—use whatever methods are necessary, such as price cuts, advance payments, or joint promotions. This view has been questioned by some people, who argue that there is still demand in the summer market, and it is not appropriate to lower prices so early in order to attract customers. What Zhongfei Net would like to point out is that industrial demand has declined significantly recently, especially in terms of orders from plywood factories. In some areas, plywood factories may continue to suspend operations, and the demand from industrial power plants will also be lower than in previous years. Although industrial compound fertilizer manufacturers will provide some support for urea prices, there are no signs at present of an increase in those prices. Therefore, it is the best strategy for urea manufacturers to secure orders as much as possible, at least to an appropriate extent. Secondly, seize every opportunity for agricultural enterprises that apply fertilizers directly or industrial compound fertilizer companies to produce summer fertilizers. Roughly speaking, the agricultural demand for urea is around 35 million tons per year, while the industrial demand is about 15 million tons or slightly more. Taking 2019 as an example, industrial demand was strong during that summer, but urea prices tended to fall. This year, due to the impact of the pandemic, and with a global focus on supporting agriculture, China’s agricultural sector’s demand for urea may increase slightly. Consequently, industrial compound fertilizer manufacturers’ production of fertilizers for the summer period might also increase slightly compared to last year. By seizing the opportunity for both agricultural use of urea in direct fertilization and its use by industrial compound fertilizer manufacturers for summer production, it is quite possible that urea prices could rise temporarily. Once again, export at a compromised price. The overall international urea price level is average; there is no immediate expectation that an increase in international urea prices will drive up domestic prices. However, if we are willing to compromise on prices in order to export more, it would be wise to do so in order to compensate for the reduced demand from domestic industrial plywood manufacturers this year. An additional 500,000 tons in exports could lead to a short-term increase in domestic prices, while 1 million tons more in exports would reduce the impact on new urea producers in the second half of the year. Finally, reduce the supply; if maintenance is needed, then carry it out. Although urea manufacturers in many areas entered their regular maintenance period in mid-April, given the current favorable profits, they are reluctant to carry out maintenance. The outcome is obvious: urea prices are likely to keep falling in the short term, creating a sort of vicious cycle. Therefore, if the equipment can no longer withstand the strain, especially if it cannot hold out until after the end of summer, it would indeed be appropriate to carry out maintenance at this time; only by reducing daily production levels can prices possibly rise again. In summary, it will be difficult for urea prices to rise; these are all my own speculative ideas. In particular, the specific impact of resuming toll collection on highways in May or June, the situation regarding new urea procurement tenders in India by the end of April, the effects of the sharp drop in crude oil prices on the overall economy, and whether urea manufacturers will choose to reduce production to maintain prices or continue operating at full capacity given the favorable profits – these are all matters of concern. It will indeed be tough for urea prices to rise, as it requires the cooperation of all the factors mentioned above. (Che Yanhong)