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Urea prices can rise at will – as the market dictates. Author/Source: China Fertilizer Network Date: 2020-07-10 Clicks: 5 In the eyes of distributors, fluctuations in urea prices seem to depend entirely on market conditions; they can rise whenever desired. To this day, urea prices still remain trapped in the pattern of rising during off-seasons and falling during peak seasons. Currently, in the domestic urea market, some companies have seen a slight increase in prices. Whether due to scattered demand or a slight reduction in production capacity, a few companies have indeed raised their prices, but the overall trend for urea remains bearish; it’s not that prices can rise simply because someone wants them to. Most manufacturers still believe that urea prices will fall, so it is necessary to pay attention to changes in three areas: agriculture, industry, and large agrochemical suppliers. Currently, in some areas of Shanxi and Shandong, the price of urea has increased by 10 yuan per ton, but that’s about it. Although production in the urea industry remains at a low level, sales of urea are slow in most regions, and market prices continue to fall. Currently, the mainstream ex-factory price of urea in the Shanxi region is around 1,520–1,530 yuan per ton, with some lower-quality grades priced at 1,460 yuan per ton. In the Sichuan and Chongqing regions, the price of urea imported from other provinces is only around 1,580–1,600 yuan per ton; in some markets, there is a situation where goods are available but not available for purchase. Regardless of future trends, it seems that the downward trend in urea prices has already begun. Firstly, the trend of a gradual increase in production levels by urea manufacturers is a negative factor for the market in the coming period. According to statistics from Zhongfei Net, as of now the overall operational rate of urea production enterprises in the industry is 53.47%, with a daily production volume of around 150,000 tons. Operations have picked up compared to previous periods. It is also necessary to take into account the resumption of production by some urea manufacturers that were undergoing maintenance recently or in the latter part of this month, such as those in Shandong and Inner Mongolia. In addition, there is the issue of new production capacities coming online. It is understood that a large urea production facility in Shandong may resume operations by the end of the month, and there is a high likelihood that new urea production facilities will come online in Jiangxi and Hubei during the second half of the year. At that time, the supply of urea in the market will increase significantly, and the problem of overcapacity will once again arise, with the degree of overcapacity becoming even more pronounced. Secondly, agricultural topdressing has generally come to an end, with small-scale topdressing also nearing completion, and industrial support is limited. The application of fertilizers for agriculture is largely complete, and local top-dressing operations are also nearing their end. The amount of fertilizer sold through occasional additional orders is negligible compared to the overall production volume of these companies. Moreover, it is still early before the need for fertilizers arises in the autumn; the grassroots markets are waiting to see what will happen. Especially this year, heavy rainfall has affected crops such as grains in many areas, so it is possible that fertilizer usage in these grassroots markets will decrease in the future ； The operation of compound fertilizer manufacturers is slowly picking up again. Policies regarding wheat fertilizers have been introduced one after another, which has led to an increase in demand for the raw material urea. However, due to the low prices of some popular compound fertilizers, collection of payments is poor, and thus manufacturers lack enthusiasm for production ； The operation of the plywood factories that seem to have been \"forgotten\" remains at a low level; these factories are under considerable pressure, have little enthusiasm for production, and show little willingness to purchase urea, resulting in overall low purchasing volumes. International urea prices have seen fluctuations, providing limited support to the urea market in China. In the end, the small nitrogen fertilizer ammonium chloride is not a \"burden\" for urea. The market price of ammonium chloride remains stable overall; in some cases, a few companies with lower production volumes have seen their prices rise by 10 yuan per ton. Currently, there is a slight shortage of wet ammonium in the East China region. The standard ex-plant price for wet ammonium is around 500–530 yuan per ton, while the standard ex-plant price for dry ammonium is around 590–620 yuan per ton. This stable trend is expected to continue in the short term, which can help support the urea market to some extent. In summary, the production of urea plants is gradually increasing again. Due to the off-season in agriculture, prices may be supported by short-term demand from the industrial sector in the future, but in the near term, an improvement will be difficult due to an oversupply. Moreover, there is a high degree of pessimism among industry players, so prices cannot rise simply because that’s desired. It is expected that the urea market will remain stable but weak in the short term, with local transaction prices possibly declining slightly; however, in the long run, the market outlook is promising. (Tan Junying)