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Turbulence in the urea market; ammonium chloride benefits from favorable conditions Author/Source: China Fertilizer Network Date: 2020-07-13 Clicks: 7 The urea market has seen fluctuations, and dealers are not surprised by this. Currently, there is a slight improvement in the market despite its overall weakness, with prices rising by 10-20 yuan per ton. However, sales in local markets remain weak, with buyers adopting a wait-and-see attitude; it’s common to see situations where goods are available at prices higher than their actual value. In Shandong, Shanxi, and Henan, some urea producers have seen consecutive price increases of 10–20 yuan per ton. For example, in Henan, the reference prices for urea at the point of sale have risen to 1600–1610 yuan per ton. In the Linyi area, compound fertilizer manufacturers have also raised their purchase prices for urea to around 1640–1670 yuan per ton. If urea prices continue to rise, it will be beneficial for ammonium chloride, but since the outlook for urea is generally bearish, this may not necessarily be good news for ammonium chloride. Currently, the ammonium chloride market is operating steadily, with prices remaining strong; in some areas there was a slight increase of 10 yuan per ton, which was a pleasant surprise. Of course, there were also individual companies in areas that are not major production zones where prices dropped by 10–20 yuan per ton. First, let’s look at the supply and demand situation for urea. Firstly, the operating rate of urea manufacturers is currently around 54.31%, and it is expected to rise further in the middle and latter parts of the year, including for the new production capacity projects that are set to come online this year ； Secondly, demand is weak; it is the off-season for agriculture, so the amount of fertilizer applied locally in the short term is limited. Any slight increase in prices will not last long. There is limited support from any remaining orders. In the industrial sector, fertilizer manufacturers are operating at low levels, with little enthusiasm for production; the rate of increased operations is slow. The procurement of raw materials for fertilizers is also slow, and the quantities purchased are not significant. Plywood factories are performing poorly, facing high inventory pressures, and thus have little desire to increase production; as a result, they purchase less urea and other raw materials. It appears that there are more negative factors than positive ones in the urea market; slight price increases merely help to counteract the overall downward trend. It is expected that such minor rises will only have a short-term effect, with the general outlook remaining bearish, and prices still likely to fall further. Secondly, as the production of ammonium chloride manufacturers resumes, the supply of this product in the market will continue to increase. Around mid-June to early July, some ammonium chloride manufacturers in China carried out routine maintenance work, which caused the overall production level to drop below 60%. There was a shortage of supply at that time. However, as these companies have now completed their maintenance, except for a few ammonium chloride manufacturers in Hangzhou, Hubei, and Sichuan that have suspended or reduced production, most other companies have returned to normal production levels. According to statistics from China Fertilizer Network, the overall production rate of companies involved in the production of caustic soda has risen to around 69.8% as of now. Moreover, in the near future, larger manufacturers plan to increase their production capacity, while those that have stopped production intend to resume operations, which indicates that production levels among these companies will rise again, leading to an increase in the supply of products on the market ； Moreover, with the current slight increase in the price of soda ash, companies’ inventories are slowly decreasing, so production is likely to proceed at a steady pace. There is a lack of concentrated and large-scale purchasing of new orders for ammonium chloride once again. Currently, the overall operational rate of the compound fertilizer industry is only around 49.93%; sales of finished fertilizers are progressing slowly. Additionally, the prices of wheat-based fertilizers set at relatively low levels, which reduces companies’ enthusiasm for production, resulting in limited purchases of raw materials for fertilizer production ； In addition, the production pace of enterprises that produce compressed ammonium chloride is also slow; they purchase raw ammonium chloride as needed. In particular, the volume of dry ammonium chloride sold is less than that of wet ammonium chloride, and its market price is lower compared to that of wet ammonium chloride. Overall, purchases are made cautiously, with procurement carried out on an as-needed basis ； Moreover, many traders are waiting and approaching purchases cautiously; with demand yet to pick up, there is little willingness to buy, as they await an opportunity to acquire goods at lower prices. Overall, although there has been a slight increase in the price of urea in some areas, there is still a lack of positive factors that could lead to a turnaround; the overall trend remains bearish, with prices still at risk of falling. This, in turn, represents a negative factor for ammonium chloride. It seems that this \"positive development\" may not actually be such a positive thing after all ； However, supported by its own costs and the demand from pending orders, the market for ammonium chloride can maintain a relatively high price level. Yet due to weak demand and few new orders, it is expected that the overall market for ammonium chloride will remain stable, with only individual large-scale orders possibly subject to negotiation. (Tan Junying)