If urea prices rise, it serves two purposes for ammonium chloride”

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If urea prices rise, it could have a dual impact on ammonium chloride – Author/Source: China Fertilizer Network, Date: 2020-05-18, Clicks: 8. After a slight increase in prices by some companies starting from May 13, there was a chain reaction in related markets, with prices rising by 10–30 yuan per ton in some cases. However, this price increase isn’t simply due to unfavorable market conditions; the overall outlook for urea prices remains bearish, with many believing that any increase in prices will be limited in magnitude and duration； If demand is not improving, then the slight increase in urea prices is likely due to a change in market sentiment or deliberate actions by manufacturers. Nevertheless, this situation is beneficial for ammonium chloride as it provides support both in terms of its price and in terms of its sales volume; it is undoubtedly a positive development. Currently, domestic urea prices have only seen a slight increase in certain areas, which has indeed spurred anxious purchasing behavior in some downstream markets; for example, the purchase price of urea by compound fertilizer manufacturers in Linyi, Shandong, has risen to around 1640–1660 yuan per ton ； The prevailing ex-factory price of dry ammonium in Jiangsu Province is around 580–620 yuan per ton. The shipping cost to Shandong Province is generally between 45–70 yuan per ton, giving it an advantage over urea. But can a slight increase in the price of urea alone reverse the trends in the ammonium chloride market? Firstly, the increase in urea prices is currently limited to a small scale only, and there are growing calls for price cuts in the future. Firstly, the operating capacity of urea manufacturers remains high; according to statistics from China Fertilizer Network, it is around 57.65%, with a daily production volume of approximately 161,800 tons. In the short term, no manufacturers have indicated any plans for maintenance work. At this initial stage when there are attempts to raise prices for urea, these manufacturers are unlikely to reduce their production levels on their own. Additionally, it is necessary to take into account the progress of those few manufacturers that are undergoing maintenance and are trying to resume production ； Secondly, demand remains moderate; there is limited support from individual orders in the agricultural sector for stock replenishment. Large traders purchase materials as needed, industrial plywood factories operate at low capacity resulting in limited raw material purchases. Sales of high-nitrogen fertilizers are poor, prices may fall or preferential policies might be introduced, which reduces production enthusiasm and limits the amount of urea purchased. Overall, the surplus supply and demand in the urea market should not lead to sustained price increases for long, and in the long term, there will also be limited support for ammonium chloride. Secondly, the supply and demand situation within the ammonium chloride industry itself is what will determine its future trend. At present, a small number of ammonium chloride manufacturers are operating at reduced capacity or have ceased production. Starting from the middle to late part of this month, some ammonium chloride producers in the East China and Southwest regions will also enter their scheduled maintenance periods, which will lead to another decline in the industry’s operational rate. According to statistics from China Fertilizer Network, the overall operational rate of caustic soda manufacturers as of now is around 68.7%. Due to the frequent drops in the price of soda ash, this rate is likely to fall to around 60% in the future. The supply volume in the market will continue to decrease, and there may be slight shortages in certain areas” ； At present, although the ammonium chloride reserves of some downstream enterprises that produce extruded granules of ammonium chloride or compound fertilizers are not large, there are still orders placed at low prices from earlier periods that are arriving. The operating rates of these compound fertilizer manufacturers are low, and their enthusiasm for production is not high; especially since the demand in the Northeast region has already ceased, the supply of ammonium chloride from that area has to be directed to other regions in order to find customers there ； Traders are cautious in their operations, opting to purchase as needed. In the early stages, the flow of supplies was slow and purchasing frequency was low; even when the price of ammonium chloride was low, they did not make large-scale stockpiles. The export situation remains modest once again; in March, China’s total exports of ammonium chloride for fertilizer use amounted to 152,800 tons, while the total exports of nitrogen-phosphorus fertilizers were 116,200 tons. This helps to alleviate pressure on the domestic market. However, compared to the same period in previous years, exports of ammonium chloride are expected to decrease in April, forcing a shift focus to the domestic market. Overall, even if there is a slight increase in urea prices, this would be beneficial for ammonium chloride, but it is not enough to change the current situation of ammonium chloride. Moreover, this increase in urea prices is only a minor adjustment, and a bearish outlook remains for the future ； Furthermore, the surplus supply and demand of ammonium chloride itself is what truly influences market conditions. In the long term, the addition of new production capacity for ammonium chloride will also affect its future trend. It is expected that urea prices will remain weak in the short term, with only minor adjustments, which will have little impact on ammonium chloride prices. Ammonium chloride producers will try to maintain stable operations, though there may be some fluctuations in local sales. (Tan Junying)