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With the drop in urea prices, can we afford to purchase phosphorus and potassium without concern? Author/Source: China Fertilizer Network Date: 2020-06-22 Clicks: 47 Recently, the pricing of urea by manufacturers in most regions has started to decline. In areas such as Shandong, Henan, and Shanxi, the price of urea has dropped slightly. Currently, compound fertilizer manufacturers in Linyi, Shandong, are purchasing urea at prices ranging from 1640 to 1660 yuan per ton. With factories currently operating at a reduced capacity, low-priced urea from other regions is affecting local markets. Agricultural demand is weak, and although there is still industrial demand, the volume of sales is not high. Manufacturers are having difficulty securing new orders, which has led to an increase in inventory pressure. Prices are likely to continue to fall in the future. Overall, the overall demand for urea has entered a slack season; demand for high-nitrogen fertilizers is declining, and demand in the Jiangsu, Zhejiang, Jiangsu, and Anhui regions is also reaching its end. The market in the Northeast region is relatively weak as well. In the downstream markets, some dealers are even selling at a loss in an attempt to avoid inventory buildup. For urea, which is in a downward trend, compound fertilizer manufacturers remain cautious in their purchases. Moreover, since it is still early before the actual demand for fertilizers rises in autumn, these companies will not rush to stock up in large quantities; instead, they will make purchases in batches according to their production plans and based on actual needs. The compound fertilizer market is currently in a period of transition between summer and autumn demand; summer demand has ended while autumn demand has not yet begun. At present, the overall operational rate of compound fertilizer plants is only around 40%, with recovery expected to occur gradually in the near future. Some large-scale compound fertilizer companies say that an autumn marketing meeting will be held by the end of the month, at which time the pricing policies for autumn fertilizers will become clear. However, recent changes in the prices of raw materials such as nitrogen, phosphorus, and potassium make it difficult for these companies to make decisions. Given the relatively weak demand in the grassroots market for summer fertilizers, companies also lack confidence in autumn fertilizers and are being cautious about purchasing urea as a raw material. So what is their attitude toward purchasing phosphorus and potassium? Let’s start by discussing the recent situation regarding ammonium nitrate. At the beginning of the week, the price of ammonium nitrate rose again. It is reported that large manufacturers in Hubei are no longer accepting orders for their 58% powdered ammonium nitrate, with the actual delivery price being 1950 yuan. Additionally, it is said that the delivery price for this same product at 55% concentration will increase to 1850 yuan by the end of the month. Deals have indeed been made at the new price, but the volume of transactions remains low for now. Currently, ammonium nitrate manufacturers do not face much inventory pressure, as there are some orders awaiting shipment. Demand from these manufacturers is on the rise, but industry experts believe that in the short term, the market will remain in a state of negotiation between suppliers and buyers. Some small and medium-sized compound fertilizer manufacturers have not yet received orders from large manufacturers in regions such as Hubei; even if they do receive orders, the quantities are likely to be small. Industry insiders say that traders also do not have much stock available. Therefore, there will still be a certain level of steady demand for ammonium nitrate in the future, and compound fertilizer manufacturers will gradually increase their purchasing activity. The price of imported potassium chloride is already close to the cost level. Coupled with a steady upward trend in international prices, it is unlikely that the price of potassium chloride will continue to fall in the near future; it is expected to reach a bottom and stabilize. However, there is currently little momentum for a rebound, and the market situation for potassium chloride derived from salt lakes remains uncertain. At present, the price received by agents for 60% crystalline potassium chloride sourced from salt lakes is around 1760 yuan, while the lowest price for 60% powdered potassium chloride available for pick-up is said to be close to 1500 yuan. The market for potassium sulfate is relatively stable, with limited pressure on manufacturers. If potassium chloride sees a rebound from its current low levels, the pressure on potassium sulfate will further decrease. Currently, there is no shortage of potassium sulfate and its gross profit margin is satisfactory; therefore, its price is likely to remain stable, as there is no strong incentive for price increases at present. Fertilizer manufacturers should make appropriate purchases based on their own needs. In summary, around the end of the month, compound fertilizer manufacturers will mainly make purchases in appropriate quantities based on their needs. However, urea prices have been falling recently, and prices remain unstable. These manufacturers are hesitant regarding the policies related to fertilizers for the autumn season, and they lack confidence. Fortunately, the price of ammonium nitrate has risen, while potassium fertilizer prices are showing signs of recovery. Overall, it is likely that compound fertilizer manufacturers will have a positive attitude toward purchasing raw materials in the near future. (Zhao Hongye)