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Lower urea prices aimed at attracting orders; but “haste makes waste.” Author/Source: China Fertilizer Network Date: 2020-05-06 Clicks: 41. The domestic urea market is currently weak, with factory orders coming in slowly. Manufacturers are reducing prices in an attempt to attract orders, and competition among them continues as usual. Nevertheless, the weak trend in urea prices has not yet ceased. Demand in the agricultural sector is moderate, with slow progress in sales at the retail level; large agrochemical suppliers are even more cautious, opting to purchase only as needed and at higher prices, which prevents any bulk purchasing. Additionally, demand for urea in the industrial sector is low, especially from plywood factories, which purchase very little of it. Therefore, if urea manufacturers want to continue reducing prices rapidly in order to attract customers, they risk acting too hastily and ending up suffering as a result. It is understood that the price of urea in China is currently declining gradually. In the Hebei region, the typical ex-factory price of urea is around 1660–1700 yuan per ton, while in the Shandong region it is around 1660–1680 yuan per ton. There is some room for negotiation when concluding deals ； Wholesale activity in the grassroots markets is weak, and the situation of goods being available at certain prices but with no demand in many areas persists. For example, the wholesale price of urea in some areas of Jiangsu is around 1730–1800 yuan per ton; for detailed prices in other regions, please visit the member area of China Fertilizer Network. It is also necessary to closely monitor the changes in various factors that influence the trend of urea prices. Firstly, the overall industry utilization rate of urea manufacturers remains around 60%, and there is no sign of a significant decline in the short term. According to statistics from China Fertilizer Network, as of now, the overall operational rate of urea production plants in the industry is around 60%, with a daily production volume of approximately 158,000–160,000 tons. Even if some large-scale plants carry out temporary maintenance work, this is only short-term; for now, no plant has announced any long-term maintenance plans ； Additionally, some newly built urea plants that came online around the middle of the year or in the second half of the year are set to begin operations, which will increase China’s urea production capacity. This is certainly a negative factor for the long-term market outlook, as an oversupply situation in the market will become more apparent. It is still necessary to be vigilant against the resumption of price wars between suppliers and consumers. Secondly, the effect of the minor nitrogen fertilizer ammonium chloride on urea is relatively significant. The ammonium chloride market is hoping for an improvement as production volumes decrease, but its prices remain low at present. Even if some ammonium chloride manufacturers carry out maintenance work as scheduled in the future, supply in the market is likely to become slightly tighter, which will support prices. There will also be a positive shift in the attitude of industry players, with companies preferring to maintain or stabilize prices rather than cut them further; this would not constitute a negative factor for urea ； However, compound fertilizer manufacturers are currently under considerable sales pressure. In an effort to reduce costs, some of them may opt to purchase ammonium chloride as a raw material, which is certainly a negative factor for urea. Once again, overall demand is weak, and there is a lack of support from centralized purchasing in the market. The agricultural sector’s needs must be mentioned first. We are now in the latter stage of the spring market, with rural farmers making only occasional purchases of fertilizers, and local retailers adopting a wait-and-see attitude, deciding not to place orders for now ； The same is true for large agrochemical suppliers; during the period when the spring market ends and demand for summer fertilizers remains modest, they show little enthusiasm for purchasing urea, sticking to their usual approach of purchasing only as needed. As a result, there is no significant demand for bulk purchases in the domestic market, and the occasional requests for additional fertilization are not enough to reverse the weak demand for urea. In the international market, despite previous expectations regarding price increases, there has been no surge in speculation. Coupled with the impact of the global pandemic and unfavorable economic conditions, the outlook for urea exports is not optimistic; as a result, their support for China’s domestic market is limited, and there is a risk of an oversupply of this product. In summary, if the urea market wants to attract customers by reducing prices, it should consider not only the current issues related to shipments; however, the real problem in the market is not the price level, but rather weak demand ； The urea market is expected to remain weak in the near term; it’s best to wait patiently for an opportunity for improvement. (Tan Junying)