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Urea prices rise again; are hopes for compound fertilizers on the rise? Author/Source: China Fertilizer Network Date: 2020-05-25 Clicks: 43 In the blink of an eye, it is already late May, and the first half of 2020 is coming to an end. The fertilizer market during this period has seen significant fluctuations: urea prices rose sharply before falling again, and after large-scale contracts for potash fertilizers were signed, there is a high likelihood of further price declines. The demand for compound fertilizers is gradually entering a slow season, with only limited demand for high-nitrogen fertilizers remaining in some areas. However, urea prices have seen a slight rebound recently. So, can compound fertilizer prices recover in the first half of the year? First, urea prices have rebounded, but not across the board. Since last weekend, local urea prices have risen before stabilizing; the factories that increased their prices did so mainly due to previously low pricing. Currently, the mainstream ex-factory price of urea in Shandong is between 1600–1620 yuan per ton, representing an increase of 20–40 yuan per ton. Given that most factories currently have some orders pending shipment, such localized price increases are understandable. However, due to factors such as declining domestic agricultural demand, a significant increase in supply, and challenges in the export market, these price increases lack real underlying support. Moreover, the operating rates of urea manufacturers remain high, and there will be another bidding process in India in June. Even if the results of that bidding are favorable, it won’t be enough to address immediate needs. In the short term, the rebound in urea prices is not likely to be sustained. Secondly, the demand for high-nitrogen corn fertilizers in the Central Plains region is about to increase, but there is little room for additional purchases. Since April, following the release of prices for high-nitrogen corn fertilizers produced by compound fertilizer manufacturers, sales of such fertilizers have started to increase. To date, most distributors in the Central China region have stocked around 80% of their needs for high-nitrogen corn fertilizers; there is very little room left for further purchases. The use of corn fertilizers in this region begins at the beginning of June, after wheat harvesting. Therefore, the recent rise in urea prices may, to some extent, accelerate purchases by end-users. However, given the limited demand, even if there are slight fluctuations in urea prices, there won’t be significant changes in the market for compound fertilizers in the short term. Once again, some compound fertilizer manufacturers offer stable prices on the surface but secretly reduce them. We know that the prices of nitrogen, phosphorus, and potassium raw materials are on a downward trend. At present, only the price of urea has seen a significant drop, while the price of monoammonium phosphate has already reached relatively low levels. After large-scale contracts for potash fertilizers are signed, further price reductions are expected, but the extent of such reductions will depend on the speed and volume of deliveries. For now, the price decline is slow; therefore, in the short term, the expected drop in raw material prices is unlikely to have a significant impact on the prices of compound fertilizers. The main reasons why some small and medium-sized compound fertilizer manufacturers have started to see price drops are the guaranteed pricing policies implemented by these manufacturers in the past, as well as the large inventory levels that distributors need to dispose of. As a result, some manufacturers maintain stable prices, while others offer prices on a case-by-case basis. Finally, the market for compound fertilizers was generally optimistic in the first half of this year. Due to the impact of the pandemic, companies expedited their shipments, and most compound fertilizer manufacturers were able to clear out their inventories; there was no significant inventory pressure as there had been last year. Although prices are under considerable pressure at present, the intense price competition will likely occur during the autumn fertilizer season, giving compound fertilizers a temporary respite.