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Rising urea prices: A change that affects everything. Author/Source: China Fertilizer Network. Date: 2020-06-03. Clicks: 8. At the beginning of June, the long-awaited summer fertilizer market began to show signs of slowing down. The already sluggish compound fertilizer market became even more sluggish during the replenishment phase, with very limited demand from end-users. Companies, hoping to process existing orders first, saw a slow arrival of new orders, forcing them to reduce production levels in order to control inventory levels. In the blink of an eye, the market has entered the transitional period between summer and autumn, with a slack season following. It is worth noting that although the summer fertilizer market came to an end in a hurry, there are various rumors regarding the start of the autumn fertilizer market. Given the unpredictable trends in raw material prices, the market is likely to remain stagnant in the short term. Currently, the raw material that is in high demand is urea; its price has risen from a gradual increase to sustained high levels, and there are still factories continuing to raise its price. The need for top-dressing of field crops in the northern regions during summer has arisen, and the increase in companies carrying out maintenance work along with reduced supply have contributed to the rise in urea prices to some extent. However, since there is a rigid demand that cannot be sustained for too long, uncertainties remain regarding future fluctuations in urea prices. Changes in the urea market trend influence the direction of the fertilizer market; it can be said that a change in one aspect has an impact on the whole. So, to what extent will fertilizers be affected by urea in the coming autumn? How to start? Firstly, the cost of phosphate fertilizers is more significant. During the autumn season, winter wheat cultivation is the dominant activity in most areas, and there is a high demand for phosphorus-rich compounds as fertilizers; as a result, the price of phosphorus fertilizers has become the main factor influencing fertilizer trends in autumn, far surpassing that of urea. As of last weekend, prices in Hubei, the main production area for ammonium nitrogen fertilizers, were on the rise, but transactions were scarce. This was mainly because previous orders had not yet been fully fulfilled; even though some compound fertilizer manufacturers were interested in making purchases, they were not willing to pay the higher prices offered ； The price of diammonium compounds remains relatively stable; the mainstream selling price for 64% concentration products in Hubei is between 2,100 and 2,200 yuan per ton. It is expected that agricultural demand will not be high in the short term. As for when the market situation will improve, it will depend on the development of the fertilizer market in autumn. Secondly, demand in autumn is even more critical. After the end of the spring and summer markets, the main issue affecting the compound fertilizer market remains seasonal demand shortages. If raw material prices remain weak during the peak market periods but demand from downstream industries stays strong, it is unlikely that compound fertilizer prices will drop significantly. For now, demand in the autumn is likely to remain stable. The reason for this is that wheat harvesting in some areas is going well, with yields reaching new highs compared to previous years; prices are also at normal levels, which to some extent boosts the confidence of downstream users in preparing for the upcoming farming season ； The second reason is that the fertilizer market was highly volatile in the first half of the year due to various force majeure factors; as production and transportation resumed, the market gradually stabilized, and demand for compound fertilizers during the autumn period is likely to be similar to usual. Finally, market competition has become more intense. The compound fertilizer market is growing increasingly sluggish; whether at the start of a season or during traditional peak periods, trading activity remains modest. Both upstream manufacturers and downstream distributors report a decline in sales. One of the reasons for this is an oversupply relative to demand, particularly the abnormal expansion of compound fertilizer production capacity, which has led to a sharp increase in supply and a reduction in the market share of individual companies ； The second reason is the severe distortions in the market: counterfeit and substandard products continue to appear despite repeated attempts to stop them, prices are uneven, and downstream users make choices regarding fertilizers in a reckless manner, resulting in significant harm to traditional brands. Faced with increasingly fierce market competition, companies also seem at a loss and are forced to cut their profit margins in order to gain market share through lower prices. In summary, the urea market is of particular importance; changes in it have a significant impact on the overall market. As the summer fertilizer season comes to an end, rising urea prices not only stimulate demand for replenishments but also lay the foundation for a smooth start to the autumn fertilizer market. It is expected that this autumn’s fertilizer season may begin earlier, and in the coming period, attention should be paid to changes in the phosphorus fertilizer market. (Feng Hongyang)