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Urea prices remain high despite bearish trends; concern grows over rising prices of ammonium-based fertilizers. Author/Source: China Fertilizer Network Date: 2020-06-04 Clicks: 57 Since the weekend, urea prices in Shandong, the Two Rivers region, Shanxi and other areas have continued to rise slightly. Currently, the average ex-factory price of urea in Shandong is 1630–1650 yuan per ton. The price at which urea is purchased by compound fertilizer manufacturers in Linyi is around 1680 yuan per ton. Lower-priced urea products are gradually disappearing from the market, while higher-priced ones also face difficulties in finding buyers. The bearish sentiment in the market regarding urea is mainly due to the high overall production volume of urea; currently, the daily production amount reaches 155,000 tons. With limited demand, supply far exceeds demand, which is why there is a strong bearish attitude in the market. But why have urea prices continued to rise slightly recently? Urea manufacturers in different regions give varying explanations; in areas such as Lianghe in Shandong, the reason is mainly the adjustment in production volumes by large manufacturers there, along with a slight increase in demand, which has led to higher pricing by these companies ； Having heard that freight rates for rail transport in the Shanxi region are set to rise in the future, I am focusing on rail transport at the moment ； The northern region’s topdressing market is gradually coming online; sales for urea manufacturers in the Northeast and Inner Mongolia are improving, and prices have also risen. However, it is reported that despite the increase in prices, there are not many transactions at the higher price levels; the increased demand from the northern region is not sufficient to alleviate the sluggishness in the national market. It is expected that the rise in urea prices will be limited in the future. Urea prices have risen; although high-end sales have not been finalized, market demand is gradually recovering amid weak conditions. The situation for monoammonium phosphate is not so optimistic. Starting in the middle to late part of May, some large manufacturers in Hubei began to consider raising the prices of monoammonium phosphate. It is reported that these companies have received orders worth tens of thousands of tons in cooperation with large compound fertilizer manufacturers in regions such as Shandong, which is why they raised their prices. Other large manufacturers in Hubei also started receiving orders, leading to an increase in prices. A few manufacturers in Sichuan likewise raised their prices symbolically, but it is said that few transactions were made at these new prices, so it’s still difficult to confirm this trend. Sales for enterprises in Hubei are fairly good, and the stock available for shipment can sustain operations for some time. However, it is reported that the actual sales performance of ammonium sulfate producers in regions such as the southwest has not improved; in fact, prices both in terms of quotes and actual transaction prices have even dropped. It is said that 58% powdered ammonium sulfate from large manufacturers in Yunnan, when delivered to Guangxi, costs 1840 yuan, while 55% powdered ammonium sulfate from smaller manufacturers in Yunnan costs only 1820 yuan upon arrival in Hunan. Those eager for price increases such as monoammonium are worried; then why haven’t prices risen despite the increased quotes? The main reason is still the demand issue. Earlier on, some large manufacturers of compound fertilizers collaborated with large ammonium phosphate producers in Hubei and other regions to purchase tens of thousands of tons of ammonium phosphate, which has begun to arrive at these factories recently. As a result, no new procurement plans have been formulated for the time being. The overall production rate of compound fertilizers has dropped below 50%, and many smaller and medium-sized compound fertilizer manufacturers are currently in maintenance mode and have little interest in purchasing ammonium phosphate as raw material. Nevertheless, autumn is indeed a peak season for demand for ammonium phosphate, so there will still be some steady demand in the future, although it is likely to be limited in volume and not concentrated. The industry expects that a wave of procurement demand will arise from late June to the end of the month. On the supply side. May falls within the usual annual maintenance period. However, due to the pandemic earlier on, companies in regions such as Hubei did not have large-scale maintenance plans; only a few companies reduced production or halted operations. Recently, those companies in Hubei and Henan that had stopped production have begun to resume operations, so the overall operational rate for ammonium nitrate remains relatively high. However, the pressure on companies is not high at the moment; inventory levels are low, and most companies have orders that can be fulfilled through mid-to-late June or by the end of June. In terms of raw materials, the price of monoammonium has little impact on market conditions; in recent years, the industry has paid more attention to the trends in sulfur prices, which change quite frequently. After rising for two consecutive weeks, the sulfur price saw slight fluctuations; the total stock in ports is around 2.75 million tons. Currently, the price of granular sulfur at the Yangtze River Port and Fangchenggang Port is 665 yuan, while the prices of sulfur at the Puguang Port in Wanzhou and the Dazhou plant have risen to 690 yuan and 590 yuan respectively. Overall, the trend in sulfur prices remains stable with an upward trajectory, which provides some positive support for ammonium sulfate prices to a certain extent; however, it does not play a decisive role in shaping those prices. In summary, demand is the key factor; currently demand is low, but the industry believes that there will still be some solid demand in the fall. Purchasing demand is expected to pick up around the end of the month. At present, ammonium phosphate manufacturers do not face much pressure in terms of inventory levels, so some companies have raised their prices tentatively before stabilizing them. In the short term, any increase in the price of ammonium phosphate is not likely to become permanent. (Zhao Hongye)