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Urea futures delivery volume reaches a new high Author/Source: Sinochem New Network Date: May 29, 2020 Clicks: 29 On May 27, the domestic urea futures completed their second delivery of the main contract at the warehouse of Henan Jinmei Tianqing Coal Chemical Co., Ltd., since they were first listed for trading on the Zhengzhou Commodity Exchange last year. For the 2005 contract of urea futures, a total of 2,052 futures warehouse receipts were issued, of which 1,221 were from delivery plant warehouses and 831 were from delivery warehouses; for the first time, the number of receipts from plant warehouses exceeded that of those from warehouses. The delivery volume reached 34,600 tons, more than 2.5 times the volume of the first delivery, setting a new record for delivery volumes. Driven by these positive factors, the enthusiasm of urea producers and downstream enterprises to participate has increased further. According to officials from the Zhengzhou Commodity Exchange, Jinmei Tianqing, as a high-quality urea producer in Henan Province, has been actively involved in the preparations for the launch of urea futures, and has become one of the first delivery warehouses for urea futures at the Zhengzhou Commodity Exchange. As a strategic partner of Jinnan Coal Tianqing, Zhongyuan Futures provided comprehensive guidance to help the company establish a futures and spot business framework as well as a risk management system. It also helped improve the relevant regulations and management procedures, thereby preparing the company thoroughly for participation in the futures market. For this urea delivery, the proactive planning and active participation of the urea manufacturers yielded excellent results. Li Zhongyi, manager of the Chemicals Department at Jinmei Tianqing Fertilizer, said that by participating in these urea futures deliveries, not only were new sales channels and methods established, but risks were also managed, operating profits were locked in in advance, and additional earnings were generated. We are more aware of the importance of participating in the futures market, making use of it, applying futures instruments, combining futures and spot markets, managing risks, and pursuing refined management. In the future, we will further explore new models for integrating industry and finance. We will actively learn about futures knowledge within the company, make better use of futures instruments, and thereby support the company’s transformation and upgrading as well as its high-quality development. Xue Haibin, deputy general manager of Zhongyuan Futures, said at the delivery site that for this urea delivery, Zhongyuan Futures actively assisted enterprises in participating, enabling it to rank third in terms of delivery volume, with a market share of over one-sixth. Urea is not only an important agricultural input but also a common chemical product. Affected by the pandemic, after the purchase of fertilizers for spring plowing and summer use in the domestic market, demand from downstream sectors weakened, leading to sales difficulties for urea manufacturers. The risks associated with single-product production and sales, along with the uncertainties in the post-pandemic era, have increased the operational risks for businesses. Urea futures can serve as an effective tool for urea producers to hedge against these risks and manage them. Although urea futures have been available for less than a year, the results of the two delivery periods show that their utility is gradually being recognized by companies throughout the industry chain. Many urea producers have also realized the necessity and urgency of using the futures market to hedge risks. Meanwhile, most companies face issues such as a lack of knowledge about futures and derivatives, or misconceptions regarding them, as well as a shortage of specialized talent; these factors give rise to doubts and concerns, preventing them from participating in and making use of the futures market. This contradiction is still quite obvious. “As a local futures trading service provider in Henan Province and a member of the Provincial Petrochemical Association, Zhongyuan Futures focuses on futures products such as urea, soda ash, methanol, PTA, and PVC. By leveraging its financial expertise within the chemical industry chain, it enhances the service capabilities of industry associations, enabling more precise support for chemical and fertilizer manufacturing enterprises. It provides these companies with comprehensive risk management services, which is beneficial for them to utilize futures platforms to mitigate market risks and improve their competitiveness. ”Su Dong, executive vice president of the Henan Petroleum and Chemical Industry Association, said so.