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Urea prices slump sharply after labeling; will compound fertilizers hold their ground after large-scale contracts are signed? Author/Source: China Fertilizer Network Date: 2020-05-09 Clicks: 7 At the beginning of May, the fertilizer market entered a new phase. India’s tender process was finalized at the end of April, and the major potassium fertilizer contract that had been pending for over a year was also signed on April 30. So many significant events took place during this transition between April and May. Fortunately, China Fertilizer Network had already predicted these developments in advance, with similar forecasts regarding price declines. So what will be the fate of the compound fertilizer market after these two events? Firstly, tendering in India is weak, and urea prices are set to fall to cost level. The new tender in India, scheduled for April 30, will have its bids opened on May 7. There are many pessimistic views regarding prices; according to research by China Fertilizer Network, the CIF price is likely to be only 240 dollars per ton, resulting in a port price of less than 1,620 yuan per ton. After deducting shipping costs, it is probable that the price of urea will drop to 1,500 yuan per ton. If a large number of contracts are awarded in the future, there might be some positive factors, so it is still necessary to closely monitor the results of the Indian tender. Currently, the prices of urea in China, especially in the Shandong region, have already exceeded 1,600 yuan per ton at the factory level, while in Inner Mongolia the price of small-grained urea has fallen below 1,500 yuan per ton, putting the cost structure under significant pressure. Secondly, the large potassium fertilizer contracts arrived as scheduled, and a subsequent decline has become inevitable. Although only Belarus has signed a large-scale contract for potash fertilizer, other countries have not yet done so; however, the price has dropped from 220 dollars to 70 dollars, indicating very low prices at the ports. It is expected that prices will continue to fall in the future, but the exact rate and extent of this decline will depend on negotiations among several major companies, as well as the volume and speed of deliveries. All these factors will influence the pace at which potash fertilizer prices drop, and any decline in the price of potassium chloride will surely affect the trend in potassium sulfate prices as well. Once again, the prices of urea and potassium fertilizers are falling, making it difficult to sustain the costs of compound fertilizers. Compared to the urea prices in March, current urea prices have dropped by more than 100 yuan per ton. Potash fertilizer prices are also expected to fall by over 100 yuan per ton in the coming period. Additionally, the prices of monoammonium and diammonium fertilizers have also declined recently. As a result, it is inevitable that the costs of compound fertilizers will decrease. However, most compound fertilizer manufacturers have not yet fulfilled all of their orders from earlier periods, and these orders were mostly placed at higher prices. Therefore, a significant drop in prices at the turn of spring and summer is not necessary; thus, short-term price stability is required. But in the middle to late May, given the substantial decline in raw material costs, the prices of compound fertilizers, especially those with high nitrogen content and sulfur-based fertilizers, will inevitably fall, and the extent of this drop will be considerable. Overall, the market demand for compound fertilizers is gradually entering a slow period; some companies may temporarily suspend production to catch their breath, while others may opt to maintain high prices in the short term. In any case, the outlook for the future is not very optimistic, and downstream distributors will be very cautious when stocking up on fertilizers.