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Urea and monoammonium salts see alternating price increases; is the price for autumn fertilizers 2100? Author/Source: China Fertilizer Network Date: 2020-06-08 Clicks: 5 As summer gives way to autumn, the fertilizer market enters another period of reduced demand. Around mid-June, in those areas where wheat harvesting is progressing quickly, the demand for corn fertilizers will reach its peak and then decline. Currently, the summer fertilizer market in regions such as the Central Plains, Jiangsu, and Anhui has entered a period of intensive restocking. However, the actual demand is far lower than expected, and the summer fertilizer market may come to an end quietly. Given the recent upward trend in the prices of raw materials such as urea and monoammonium phosphate, it is difficult to determine the trends for autumn fertilizers, and establishing standard prices and pre-payment policies proves challenging. Currently, the focus of discussion in the fertilizer market is naturally on urea and monoammonium nitrate, mainly due to the surge in seasonal demand. The rising prices of urea and monoammonium nitrate have led to high expectations for future market trends. After continuous price increases over two weeks, urea prices remain strong in many areas. The demand for top-dressing of field crops during the summer coincides with the shutdowns of some urea factories for maintenance, resulting in a reduction in supply and thus bringing much-needed positive factors to this round of urea price rises ； In autumn, the demand for phosphatic fertilizers accounts for the largest share in the production of compound fertilizers. Ammonium phosphate, a key raw material for high-phosphorus fertilizers, is also seeking opportunities to increase its price. Following a series of large orders, ammonium phosphate factories in Hubei’s main production areas have raised their prices; the mainstream price for 55% powdered ammonium phosphate remains around 1800–1820 yuan per ton. However, there are few transactions at higher prices. It is likely that the price of ammonium phosphate will not see a significant rise until the production of autumn fertilizers by compound fertilizer factories actually begins. With urea and monoammonium salts seeing successive price increases, determining the pricing for fertilizers in autumn has become a challenge. Taking the 45% (25-14-6) chlorinated wheat fertilizer as an example, based on the current prices of raw materials, the prevailing ex-factory price is likely to be around 2000–2100 yuan per ton. What factors will influence this price going forward? First, the cost level. Recently, there has been a clear upward trend in the prices of urea and monoammonium phosphate among the nitrogen, phosphorus, and potassium raw materials. The price of urea is already subject to significant fluctuations; therefore, unless there are large swings in its price, it will not have a substantial impact on the cost of compound fertilizers. Moreover, since autumn fertilizers tend to be high in phosphorus content, the price of phosphorus fertilizers may be even more important. As mentioned earlier, an increase in the price of monoammonium phosphate in the short term seems unlikely. At present, most compound fertilizer manufacturers have not begun to stock up on raw materials in large quantities. Some say that they will hold marketing meetings for autumn products in the second half of June, at which time the initial price trends and pre-payment policies for autumn fertilizers will be determined. If the price of urea continues to remain stable and the price of monoammonium phosphate is supported by the peak demand period, then the cost of raw materials will have a positive effect on the market for autumn fertilizers. Secondly, how much is needed. Apart from raw material costs, the biggest factor driving the compound fertilizer market is demand from downstream sectors. When demand is strong, even weak raw material prices have little impact on the cost of compound fertilizers. The same is true in the market this autumn – demand determines success or failure. However, the prospects are not optimistic. One reason is the low price levels of crops, which dampen enthusiasm for stockpiling among downstream users. At present, wheat harvesting is coming to an end in some areas; although yields are roughly the same as in previous years, market prices remain low and traders are not very inclined to purchase ； The second reason is the frequent occurrence of severe local weather conditions; for example, in northern Anhui, persistent drought has delayed the sowing of corn, forcing delays in the preparation of supplies downstream, which may lead to a decrease in demand. Finally, supply flexibility. As of this week, the overall operating rate of large-scale compound fertilizer manufacturers across the country is around 44%, down by nearly 10 percentage points from early May. The summer fertilizer market is coming to an end, while the autumn fertilizer market remains stagnant. Most companies reduce their production volume or shut down temporarily during the replenishment phase in order to clear their inventory and get ready for the production of autumn fertilizers. The maintenance period lasts around 10–20 days, and until the autumn fertilizer market starts to pick up, the production rate is likely to remain at its current level. In recent years, the oversupply in the compound fertilizer market has become increasingly severe; there are few periods throughout the year when supply is tight, and the basic supply at various stages is likely to be fully secured. As for this autumn’s compound fertilizer market, companies will still maintain sufficient inventory levels to cope with the situation. In summary, before the autumn fertilizer market kicks off, the prices of urea and monoammonium phosphate are on the rise. Regardless of what happens in the future, price increases will at least create a positive atmosphere at the beginning of the market. However, one should not rely on luck going forward; it is best to proceed with caution. (Feng Hongyang)