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The greater the drop in urea prices, the more stagnant the market for high-nitrogen fertilizers. Author/Source: China Fertilizer Network Date: 2020-05-08 Clicks: 21 After the May Day holiday, the fertilizer market returned to normal, and the summer fertilizer market officially began. Long before the end of the spring market, the summer compound fertilizer market had already started operating. To date, the factory prices for high-nitrogen fertilizers in various regions have become clear; for example, the standard factory price for 40% chlorinated fertilizers (28-6-6/30-5-5) is between 1,800 and 1,950 yuan per ton, representing a decrease of over 100 yuan per ton compared to previous levels. Not only is the price level lower than that of the same period last year, but the atmosphere in the market for transactions is also much weaker than before. The recent weakness in the urea market has further contributed to increased pessimism regarding the future prospects of high-nitrogen fertilizers. Following the release of another round of bidding processes for urea in India, the domestic urea market did not respond strongly; even during the holiday period, prices continued to decline slightly. In the main production areas of Shandong and the Two Rivers regions, urea prices dropped to 1,600–1,660 yuan per ton. The main factors contributing to this situation are an obvious surplus in supply and insufficient demand. As existing orders are being fulfilled gradually, new order intake remains weak, putting increasing pressure on companies. Although there are positive factors that could drive prices in the near term, such as international tenders and the resumption of toll collection, the domestic market is not receptive to them; therefore, prices are likely to remain weak in the short term. The decline in urea prices has, to some extent, hindered the development of the high-nitrogen fertilizer market; the greater the drop, the more stagnant the situation in the summer fertilizer market becomes. First, actual demand has decreased. The demand for high-nitrogen corn fertilizers in the summer is primarily concentrated in regions such as Lianghe, Shandong, Jiangsu, and Anhui. The volume of demand is considerable, and it is often highly anticipated by market participants. However, the actual demand this summer may decrease. One reason for this is the smaller area dedicated to crop cultivation; in recent years, crop rotation has become more common in some areas, leading to significant changes in the crop structure, and as a result, less fertilizer is needed for field crops ； The second reason is the lack of willingness to engage in planting downstream; aside from the gradually decreasing short-term profits, relatively poor long-term prospects also reduce the enthusiasm of those at the grassroots level for planting. The decline in actual demand has added further turbulence to the already struggling high-nitrogen fertilizer market. Secondly, the remaining demand is limited. Compared to previous years, the market periods this spring and summer have been relatively short and rapid. Since the start of the summer fertilizer market, more than half of the procurement by downstream users has already taken place, with limited remaining demand in some areas. One reason for this is that at the beginning of the market, the price of urea, which is a key raw material for high-nitrogen fertilizers, remained high, which in turn boosted enthusiasm among downstream users for making purchases; as a result, orders were placed early on when prices were still low, with further replenishments occurring later on ； The second reason is that the cancellation of tolls on highways in the earlier period led to a relative decrease in transportation costs by road. In order to minimize costs, there was an increased enthusiasm for shipping goods and picking them up between suppliers and customers, resulting in a surge in activity related to goods pickup before tolls were reinstated on highways. Finally, the prices of other raw materials are concerning. In addition to the unsatisfactory situation regarding urea prices, the prices of phosphate and potash fertilizers are also a cause for concern. There are hardly any positive factors at present. Since the factories in Hubei’s main production areas resumed operations, the supply of ammonium phosphate has gradually returned to normal levels; on the other hand, demand has started to weaken, leading to falling prices. Currently, the standard ex-factory price for 55% ammonium phosphate in Hubei is between 1800–1850 yuan per ton, with the actual price upon delivery being even lower. It is said that prices will continue to drop slightly in the near future ； A large contract for potassium chloride was signed at the end of April. Currently, there are no significant changes in the price of potassium chloride, but considering the domestic and international market conditions, as well as costs and supply situations, the outlook for the future remains pessimistic. In summary, as summer is a critical period for preparing fertilizers, the weak market conditions for urea further weigh on an already sluggish market. Currently, compound fertilizer manufacturers still tend to maintain high prices, but discounts are offered on new orders; it is expected that the market will remain weak and volatile in the short term. (Feng Hongyang)