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Urea Prices on the Brink of a Drop / Author/Source: China Fertilizer Network / Date: 2020-06-12 / Clicks: 7. Since early June, domestic urea prices have seen fluctuations; although the magnitude of these changes has not been significant, there have been many companies that reduced their prices. This pattern of ups and downs has created a somewhat \"strange\" atmosphere in the market, making one realize that it’s only a small step from rising prices to falling ones. At present, urea manufacturers have made slight price adjustments; large traders have not yet reached a time to buy at low prices and continue to purchase as needed. There is limited sales in the grassroots markets, and some cases of price inversion occur due to a lack of demand. The enthusiasm for purchasing in the industrial market is not high, so transactions in the urea market remain modest. Urea manufacturers are becoming more determined to hold their prices, while the support for price increases is weakening, which in turn leads to a slowdown in transactions. Currently, urea prices in various regions are showing slight fluctuations, with the upward trend largely coming to a halt; there are increasing instances of hidden or explicit price cuts. For example, in Shanxi, the standard ex-factory price of urea has dropped to around 1570–1580 yuan per ton. In Linyi, Shandong, fertilizer manufacturers’ purchase prices for urea rose to 1710–1720 yuan per ton before transactions slowed down, after which the price fell back to around 1700 yuan per ton – which indeed reflects the notion that small changes can have significant impacts. In Hebei, the standard ex-factory price of urea increased slightly to 1630–1670 yuan per ton, but manufacturers reported poor sales performance. The focus within the industry is now on what will happen to urea prices going forward and what the key factors are that will influence their trend. Firstly, although the operating capacity of urea manufacturers remains relatively low in the short term, there is a trend toward recovery in the long run. Apart from some urea production units at large factories in Shandong, the Northeast, and Inner Mongolia that are currently under temporary maintenance, most other enterprises are operating at normal levels. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises is 53.62%, with a daily production volume of around 150,500 tons. Production is expected to increase once those large urea production facilities in Shandong and the Northeast that are under maintenance resume operations later in the month. Meanwhile, a few urea production units in Anhui that are under maintenance are also set to resume operation ； Furthermore, with liquid ammonia prices dropping significantly in North and East China, it is necessary to be cautious that some companies might shift their production focus slightly toward urea. Once again, market demand is moderate. It is the off-season for the agricultural market, so overall purchasing volume is limited. Although there is some purchasing activity in certain areas such as Central China, the amounts involved are not large, and this activity generally comes to an end by the latter part of the month. At this time, urea prices are volatile, and most forecasts indicate a downward trend in prices going forward; as a result, it is difficult for local distributors to sustain their practice of purchasing as needed ； Larger agrochemical suppliers will certainly not stock up before they know the situation will stabilize; instead, they remain cautious and make purchases only as needed ； In the industrial sector, the overall operational rate of compound fertilizer factories is around 45%, with particularly low levels of activity in some of the key production areas. This results in a lack of large-scale orders for urea. Additionally, demand from plywood factories has not recovered since the beginning of this year; poor demand from downstream industries forces these factories to operate at reduced capacity, which in turn leads to lower purchases of urea as a raw material. These weak demands clearly constitute a significant negative factor for urea prices. Ultimately, the printing marks on the export side may be a double-edged sword. India may issue tenders tomorrow night. Judging from previous tenders in India, such tenders can be a double-edged sword: on the one hand, they provide opportunities for our country’s urea to be exported, but on the other hand, they result in a lack of price advantages, which in turn forces down domestic urea prices; this is likely to trigger another round of price cuts in the domestic market. In summary, the positive factors supporting the urea market in the short term are now in the final stage of being absorbed. As production by urea manufacturers gradually resumes and pending orders are fulfilled, the market will still face weak demand from downstream sectors, with negative factors becoming increasingly apparent. It is expected that the urea market will experience slight fluctuations in the short term, with changes possibly occurring at any moment. (Tan Junying)