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Urea remains weakly stable; further declines possible. Author/Source: China Fertilizer Network. Date: May 6, 2020. Clicks: 40. On the eve of Labor Day, most urea manufacturers saw another drop in prices in order to ensure sufficient stock for delivery during the holiday period: the mainstream ex-factory price of urea in Shandong dropped to 1,650–1,680 yuan per ton. In Linyi, compound fertilizer manufacturers offered a purchase price of 1,680–1,700 yuan for urea, while some large manufacturers offered even lower prices of around 1,620 yuan for their urea. In Hebei, the mainstream ex-factory price of urea was 1,660–1,700 yuan, while in Henan it was 1,660 yuan. In Shanxi, the mainstream ex-factory price of urea dropped to 1,580–1,590 yuan, with larger-grained urea costing 1,600–1,620 yuan. Most manufacturers had a decent amount of orders pending delivery. Given these conditions, it seems that urea prices will remain weakly stable at least until after May 6th. Additionally, demand for high-nitrogen fertilizers provides some support for urea prices. On the surface, the outlook for urea prices seems promising. However, considering the overall economic situation, the long-term trend for urea prices remains concerning, due to the following factors: First and foremost, there is still supply pressure. Recently, some factories have carried out temporary maintenance work, but the supply volume has remained around 160,000 tons. At present, no factory has plans for long-term maintenance, which means that the supply pressure for urea will remain high in the near future. Given the limited storage capacity of urea manufacturers, price wars are inevitable ； In the long term, this year some domestic enterprises will still put new urea production facilities into operation; the additional annual production capacity resulting from these facilities could exceed 2 million tons. Additionally, some enterprises in Xinjiang that have ceased operations will also resume production in the second half of the year. Given that there has been no significant increase in demand in both domestic and international markets, the supply pressure in the market will not be effectively alleviated. Secondly, costs are gradually declining, and there is still room for profit margins. Recently, the raw material market has been relatively sluggish, resulting in low costs for urea manufacturers. In order to reduce these costs, there is no significant pressure to cut supply at present, so it is unlikely that there will be any notable reduction in output. Given the current cost levels, some urea manufacturers should achieve profits of over 200 yuan. Since most of these companies have limited inventory levels, raising prices to stimulate purchases from downstream markets is the simplest and most effective approach for them. This is one of the reasons why price changes for urea are particularly noticeable among agricultural inputs. Against the backdrop of an oversupply, there are still signs of further declines in urea prices in the long term. Finally, demand is unlikely to show significant improvement. Recently, as domestic demand for fertilizers in spring has come to an end, demand for high-nitrogen fertilizers in summer began to increase already a month earlier. Following the concentrated purchases during the pandemic, current inventory levels of urea among downstream compound fertilizer manufacturers are fairly adequate. High-nitrogen fertilizers will only be available until around mid-May, after which there will only be occasional demand for top-dressing in various regions, along with sporadic purchases in the southern market. As a result, domestic demand will have limited support in the coming period. On the international front, although urea production in India is relatively low this year, falling crude oil prices have led to a gradual decrease in the overall cost of urea internationally. Although there is demand, it is easy to predict that export prices for urea from China will not be very high this year. In summary, the price of urea remains weak and stable in the short term, but there are signs of further decline in its price over the long term. Although there is still a demand for urea as a fertilizer in some areas, which might lead to slight price increases in certain markets, it is still advisable to approach purchases with caution. (Wu Wenchao)