Urea prices struggle to rise; is the fertilizer market on the mend?

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Urea prices struggle to rise; is the fertilizer market on the mend? Author/Source: China Fertilizer Network Date: 2020-05-18 Clicks: 7 Recently, urea prices have seen a continuous decline before experiencing a slight rebound. The pricing of urea by large manufacturers in Shandong has risen slightly first; the industry has not yet reacted to this change and is confused as to what factors could lead to such an increase. At present, factories are mostly ready to sell at low prices, and there has been no breakthrough in new orders. Therefore, rather than staying at those low prices, it would be better for factories to try to push prices up – why not? However, when it comes to demand, both agricultural and industrial demands are currently not very promising. Although there will be some increase in agricultural demand in the future, it’s still a bit too early for that to happen. Some industry insiders believe that this uptick in prices is premature; following the price hikes, there has been no significant change in actual transactions. At present, compound fertilizer manufacturers in Linyi, Shandong Province, are purchasing urea at prices ranging from 1,640 to 1,660 yuan per ton (the same unit applies hereafter). Meanwhile, some factories continue to wait and see. However, the rise in urea prices is somewhat beneficial to the fertilizer market. Recently, the compound fertilizer market has been in a downturn, with slower sales. Companies in some areas say that certain production facilities are scheduled for maintenance work in the near future. Overall, the operating rate of compound fertilizer plants is showing a gradual decline, mainly due to the completion of orders placed earlier; there are few new orders for corn fertilizers. Only a few companies continue to operate at high levels, doing so as preparation for future replenishment needs. At present, little activity is seen in the grassroots markets, but once replenishment begins, demand is expected to be concentrated and short-lived. However, the demand for late-season rice fertilizer is also gradually picking up; thus, there remains a fundamental need. It’s just that the current market sentiment is rather mediocre. Therefore, the expectations regarding raw materials such as nitrogen, phosphorus, and potassium are not high for now. As mentioned earlier, an increase in urea prices could be beneficial for the fertilizer market, and that is indeed the case. However, over time, compound fertilizer manufacturers continue to focus primarily on downstream demand; when demand is weak and the operating rates of these factories have declined recently, their willingness to purchase raw materials is also low in the short term. The ammonium sulfate market is currently sluggish; due to the impact of the pandemic earlier on, production rates remained low. Once these rates started to rise, ammonium sulfate manufacturers do not have any plans for annual maintenance work at the moment. In particular, most large factories in Hubei continue to operate at high production levels. The orders that ammonium sulfate manufacturers have pending can be fulfilled until the latter part of the month or at the end of it, so there is no significant pressure on inventory levels. Although new orders are not coming in as well as expected, manufacturers are keeping their prices stable for now, after the May Day holiday. Fertilizer compound manufacturers do not seem to have a strong desire to purchase monoammonium phosphate at the moment; they will continue to adopt a strategy of purchasing only what is needed in recent years. It is reported that large fertilizer compound manufacturers in regions such as Shandong and Henan do intend to restock, but the amount is not large, and thus the quantity allocated to monoammonium phosphate manufacturers for future use is limited. The price of potassium chloride in the port market remains uncertain; currently, the actual transaction price for 62% pure potassium at ports is between 1,850 and 1,900 yuan, but it is expected that prices for large-scale purchases will drop to around 1,800 yuan in the future. The market situation for potassium chloride in Qinghai is gradually becoming clearer, but due to the influence of imported potassium, there is limited acceptance of its price in the industry; it is believed that its price may continue to fall in June. As a result, fertilizer manufacturers are not very enthusiastic about making purchases, and they tend to wait and replenish stock only as needed. In summary, it seems that there will be no significant improvement in the fertilizer market in the short term. However, the current sluggish situation may be serving to build up momentum for the market in the future, with hopes that the fertilizer market will improve. (Zhao Hongye)