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The Worries Over Falling Urea Prices: Troubles That Just Disappear from One’s Mind Only to Appear in Another / Author/Source: China Fertilizer Network / Date: 2020-04-24 / Clicks: 22. In ancient times, there was the sorrow of longing and separation, which would disappear from one’s mind only to reappear in another; today, fertilizer manufacturers face similar troubles. By late April, the domestic urea market is in a slow period, with weak agricultural demand, moderate industrial demand, and poor domestic consumption. Additionally, the export market is hindered by the pandemic abroad. Meanwhile, urea manufacturers continue to operate at high capacity levels, which leads to a general decline in prices. End-users prefer to buy when prices are high rather than low, further weakening the urea market. According to urea traders, sales at the end-user level are currently poor; in some areas there is a supply available at wholesale prices but no demand, and purchases are made only as needed. Meanwhile, urea prices have risen slightly in regions such as Guizhou, but the pace of sales has slowed down ； On the side of manufacturers, prices have seen a slight decline. Currently, the typical ex-plant price of urea in Hebei is around 1690–1720 yuan per ton, while in Shanxi it is around 1650 yuan per ton. There is room for discounts in transactions, and some traders have indicated that certain urea producers intend to reduce prices in the near future. The pace and extent of the recent reduction in urea prices have just begun to slow down, and caution among market participants is increasing steadily; it’s as if the problem has just gone away only to reappear soon after. Of course, it is still necessary to pay attention to the various factors that influence this situation. Firstly, the operating capacity of urea manufacturers is at a high level, with further increases still possible. A production rate of around 60% is not something unusual for urea manufacturers. According to statistics from China Fertilizer Network, the overall industry production rate for urea manufacturers as of now is around 59.59%, with a daily production volume of 167,300 tons. Given the unfavorable economic conditions, the fertilizer industry, including urea production, faces certain pressures in terms of costs and sales. Therefore, unless there are any unexpected circumstances, urea manufacturers are unlikely to voluntarily reduce their production levels ； Additionally, there is an oversupply of liquid ammonia in the domestic market, leading to a significant drop in prices; however, sales remain weak. For example, the current reference price for liquid ammonia at the factory level, based on cash transactions, in Shandong is around 2300–2600 yuan per ton, while in Jiangsu it is around 2560–2750 yuan per ton. The methanol market remains weak as well, so the possibility of converting liquid ammonia into methanol is low. Considering reserves as well, some companies are likely to shift their production focus from liquid ammonia to urea, which is something that needs to be taken into account. Secondly, the spring market has ended, while the summer market has not yet fully started. The tail end of the spring fertilizer market came to an end in a hasty manner; demand in the agricultural sector remains low during this off-season period. Only in a few cases do end-users purchase fertilizers, while wholesale sales suffer from a lack of demand, with transactions occurring only sporadically as occasional orders are placed ； Although the price of urea has only dropped slightly, large agrochemical suppliers are also very cautious, with a strong tendency to wait and see, opting to purchase and stock up as needed ； The production of high-nitrogen fertilizers by industrial compound fertilizer manufacturers during the summer started slowly; overall, the operation rate of the industry was slightly above 60%, and the purchase volume of raw material urea was limited ； Plywood factories are under considerable pressure, have low enthusiasm for production, and there is no increase in overall operational activity; as a result, their demand for urea remains limited ； However, when it comes to the demand for urea, exporting could be an option to consider. According to reports, the bidding process is scheduled to take place at the end of the month; whether it’s through speculation or actual winning of bids, this could help alleviate the urgent situation in the urea market” ； Another factor is the anticipation of the launch of the summer fertilizer market, with urea also seeing a surge in demand. Finally, the price trends of ammonium chloride also influence urea to a certain extent. The ammonium chloride market is operating in a weak state; recently, as the orders that were pending have been fulfilled one after another, there has been limited new business, which has led to a slow and slight decline in prices. However, in May, a few large manufacturers will enter maintenance periods, which should help reduce the shipping pressure on these companies to some extent. It is expected that the price decline will also be limited in the future. Nevertheless, ammonium chloride prices remain low, providing little support for urea prices. Some compound fertilizer manufacturers may choose to use more ammonium chloride instead of urea. In summary, the decline in urea prices has just begun to level off when the industry once again becomes pessimistic. Given the cautious attitude of end-users, as well as the practice of large agrochemical suppliers stocking up as needed, overall demand remains weak. At the same time, there is a trend of increased supply, so it is expected that urea prices will remain low in the short term, with further declines possible. (Tan Junying)