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Urea Prices Rising, but with Caution – Author/Source: China Fertilizer Network, Date: 2020-06-08, Clicks: 5. Since mid-May, the urea market has seen price increases driven by various factors. After half a month of such upward pressure, the current average ex-factory price of urea in Shandong is 1650 yuan per ton. In Linyi, compound fertilizer manufacturers are purchasing urea at 1700 yuan per ton. In Hebei, the average ex-factory price of urea ranges from 1650 to 1670 yuan per ton, while in Henan it ranges from 1650 to 1660 yuan per ton. Compared to mid-May, the overall price increase is around 100 yuan. As market demand in many regions has begun to pick up, there is still a possibility of further price increases. However, the recent rise in urea prices has been relatively slow, and this is due to the following factors: Firstly, the increase in urea prices has been higher than expected. Although market demand has begun to rise at present, the price increases implemented by urea manufacturers earlier on seemed to be driven by artificial speculation; moreover, payments were often made at low prices at that time. To this day, in many areas, some urea is still available at low prices. Although manufacturers are eager to raise prices, the downstream market, in order to avoid inventory buildup, tends to set prices lower than the high levels set by the manufacturers. As a result, there is limited demand for new orders from manufacturers, which in turn limits the overall increase in urea prices. Secondly, the initial supply of urea was relatively high. Since the end of April, the daily production volume of urea has been above 160,000 tons. During the period last month when factories were operating at full capacity, in order to ensure a steady supply, market demand was relatively low; as a result, traders had considerable stockpiles of urea, and overall inventory levels were high. The market needed some time to absorb this excess supply. Although urea supply has decreased recently, most factories have only suspended operations for a short period. In order to meet this year’s production targets, some factories plan to resume production around mid-to-late June. Given the current inventory levels, there is no severe shortage of urea available on the market. Therefore, although urea prices have risen due to demand, the overall increase has been relatively limited. Finally, market demand is relatively low in the later stage. The duration of market demand in various regions this time is generally around mid-June. Although there is still demand for high-phosphorus fertilizers later on, the overall demand is relatively low; the demand for top-dressing fertilizers is also not significant. At present, industrial demand is fairly average. The peak production period for high-nitrogen fertilizers has already passed, and only the sales phase remains ； There remains pressure regarding the subsequent supply of urea. According to data from China Fertilizer Network, after July arrived, most urea manufacturers resumed production; among them were those that had been shut down for a long time, as well as new production facilities that came online. Taken together, these capacities mean that the daily production volume of urea could exceed 170,000 tons. For urea manufacturers, the priority is determining the direction in which their products will be sold, with price being a secondary consideration. In order to ensure a steady supply of products, prices have remained relatively stable recently. In summary, there is still demand for urea in downstream markets at present, although overall production by companies has decreased slightly. It is expected that prices will not face any risk of falling in the short term, and there are still signs indicating a need for price increases. However, after mid-June, as market demand weakens, there could be a risk of price declines; therefore, traders are not advised to stock up large quantities in anticipation of future market conditions. (Wu Wenchao)