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Urea prices remain high but under pressure; ammonium chloride sees a slight increase. Author/Source: China Fertilizer Network Date: 2020-06-08 Clicks: 5 Over the past half month, although there has been no excessive enthusiasm for urea in the domestic fertilizer market, it remains a topic of discussion among market participants. Urea prices have seen a slight rise, as if in an effort to catch big fish by using a long fishing line; however, in some regions sales are weak, leading to a slight drop in prices, and there have also been cases of lower prices in certain factories. Ammonium chloride is different in this regard. This year, due to the impact of the pandemic, companies involved in the production of soda ash have faced increased pressure; prices for soda ash have remained low, and the operating rates in downstream industries such as glass manufacturing have been low, resulting in excessive inventory levels of soda ash. As a result, these companies have had to reduce their production levels to ease the pressure, which has, to some extent, benefited the ammonium chloride market. Currently, there is a slight shortage of supply in certain areas of the ammonium chloride market, with a few companies raising their prices by 10–30 yuan per ton. Due to reduced production volumes, some companies are using their own supplies instead of selling them, and they also need orders to sustain their operations. However, the trend of ammonium chloride prices will still depend on changes in both supply and demand. The first thing to consider is the nature of the effect of urea on ammonium chloride. The overall industry utilization rate for urea manufacturers is 55.09%, with a daily production volume of around 154,600 tons. There is no likelihood of a significant drop in production levels in the short term. However, by the middle to late part of this period, some urea manufacturers that were undergoing maintenance will resume operations, and additional production capacity resulting from technical upgrades will also come online, leading to an increase in the supply of urea ； In terms of demand, the agricultural sector is in its off-season; there are only minor orders from local markets, and the amount of fertilizer used for top-dressing is not large. Large agrochemical companies have no plans to place large-scale purchases, waiting instead for urea prices to drop again before making stockpiles ； And plywood factories have a low demand for urea ； The compound fertilizer plant is operating at only 44.69%, so the demand for raw materials is limited; purchases of urea are also made as needed. In the short term, the high-priced urea market may see a slight further rise in some areas, but it remains unstable and is at risk of falling; this could also have a negative impact on ammonium chloride. Secondly, the low operating level of ammonium chloride manufacturers is the biggest positive factor in the current market situation. At present, the operating rate of ammonium chloride manufacturers in Henan is relatively low, at slightly above 50%. Some ammonium chloride plants in East China are under maintenance, and it is expected that once the maintenance is completed, the remaining plants will also enter maintenance mode. Ammonium chloride manufacturers in Hubei will carry out maintenance work for about half a month around the 10th. The resumption of operations at a factory in Yunnan has been delayed until the end of the month. Some ammonium chloride plants in Sichuan and Chongqing are operating at reduced capacity. According to statistics from China Fertilizer Network, the overall industry operating rate for ammonium chloride manufacturers stands at around 52.3% as of now, and this level will remain low throughout June; therefore, there will not be much pressure on companies’ inventory levels. Demand for ammonium chloride remains weak, with slow progress during this transition period. The prices of compound fertilizers are continuing to fall. The overall production capacity in this industry is low, and demand is weak with slow sales. Coupled with the lack of cost support, companies have little incentive to produce, resulting in limited purchases of various raw materials used in fertilizer production ； At the same time, the preparation of raw materials for the autumn fertilizer market has not yet begun; those in the downstream sector dealing with ammonium chloride are adopting a wait-and-see attitude, especially in the Northeast region, where there is no purchasing activity nor any inquiries at present ； Traders adopt a cautious approach to purchasing, sticking to a pattern of buying only as needed ； Ammonium chloride particle manufacturers require only a small amount of raw ammonium powder. Finally, the export of ammonium chloride remained relatively stable. According to customs data, China’s total exports of ammonium chloride for fertilizer use were 152,800 tons in March, 112,800 tons in April, and the export volume in May is expected to be slightly lower than that in the previous two months. Nevertheless, this still provides some support for the domestic ammonium chloride market. In summary, the trend for urea in the short term is favorable, which also provides support for ammonium chloride; however, the long-term outlook for urea is negative, and this could turn out to be a disadvantage for ammonium chloride ； Moreover, the supply and demand for ammonium chloride itself have also changed; in the short term, positive factors are prevailing. It is expected that companies producing ammonium chloride will maintain stable operations after a slight price increase, while those with lower prices may consider raising their prices slightly as well, before returning to stable operations to recover. (Tan Junying)