How much room is there for additional high-nitrogen fertilizer supply? When does it start?

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How much room is there for additional high-nitrogen fertilizer supply? When does it start? Author/Source: China Fertilizer Network Date: 2020-05-18 Clicks: 6 As mid-May approaches, the demand for fertilizers in spring has already come to an end, and the summer fertilizer market is struggling to get off the ground. Compared to previous years, the summer market for compound fertilizers appears to be shorter and more urgent. At present, some regions have reached the stage of restocking, but there is not much enthusiasm for further purchases on the part of downstream users; in fact, sales in certain end markets have practically come to a standstill. Due to the pessimistic outlook for the future market, the tense situation continues to worsen. 　　According to China Fertilizer Network, as of mid-May, the stock levels of fertilizer available for summer corn cultivation in various regions were around 70%-80% of those seen in the same period over previous years. This means that there is only a 30% margin or less for additional purchases. Coupled with small-scale transactions across different regions, demand for high-nitrogen fertilizers in certain areas may already be at its limit; thus, the actual need for further purchases is much lower than what was initially thought. In addition to the insufficient remaining demand, the recovery of the replenishment market is also slow; given the lack of positive factors between upstream and downstream sectors recently, terminal replenishment activities are likely to be further delayed. 　　First, actual demand has decreased year-on-year. Demand for compound fertilizers in the spring market is declining, and the summer period is no exception to this trend. As mentioned earlier, such a decline is inevitable. One reason for this is the generally low enthusiasm among farmers for planting; in some areas, the area dedicated to cultivation is decreasing. Low crop prices and frequent natural disasters have led to low incomes in the agricultural sector, which in turn affects investment in further agricultural activities ； The second reason is the significant adjustment in crop planting patterns; for example, in the Northeast region, the area devoted to soybean cultivation has seen a substantial increase this spring, while the area allocated to corn cultivation has decreased accordingly. It is quite common for economic crops to replace field crops during the summer, and the actual demand for traditional compound fertilizers is on the decline. 　　Secondly, the remaining space for restocking is shrinking. An early start and a short duration for the high-nitrogen fertilizer market were characteristics of this summer; it seemed as though things had ended before they even really began. As for those market participants who still relied on replenishing stock as a solution to their problems, they are likely to be greatly disappointed this time. One reason for this is that the price of urea in the market rose sharply at the beginning, which supported the prices of high-nitrogen fertilizers and significantly improved trading sentiment. Additionally, with the cancellation of tolls, both companies and distributors rushed to get involved in purchasing and selling these fertilizers ； The second reason is the asymmetry in supply and demand; overall, there is still an excess of supply. Dealers have a wide range of supply options available to them, and prices vary, which to some extent leads to a reduction in the market share of certain companies. 　　Finally, the replenishment needs will still be delayed. Given the near-stagnant state of the high-nitrogen fertilizer market recently, the timing of the emergence of demand for restocking has become a focus of attention in the industry. Based on the current situation of raw materials, it is likely that demand for restocking will continue to be delayed. One reason for this is the volatility in the price of urea as a raw material; after a decline in prices, some factories in regions such as Shandong and the Two Rivers areas raised their export prices slightly. However, with another attempt at price increases failing, the possibility of a significant recovery in domestic urea prices is low ； The second reason is that there is no optimism regarding the future of phosphorus and potassium fertilizers, especially in terms of the price of potassium chloride. The prices agreed upon in large-scale contracts are 70 dollars per ton lower than those from last year. Although market fluctuations in the domestic market are currently limited, over time this will surely lead to significant negative impacts. 　　In summary, there is not much remaining warmth from the high-nitrogen fertilizers used in summer; the relatively limited room for additional supply and the lag in demand may force the summer fertilizer market to come to an end in a hasty manner. As for the trends in the autumn fertilizer market, it will be necessary to pay further attention to changes in raw materials as well as supply and demand conditions. (Feng Hongyang)