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Urea has just dropped for a few days before rising again – is it due to printing specifications? Author/Source: China Fertilizer Network Date: 2020-07-23 Clicks: 123 Urine prices are unlikely to rise significantly in the short term; the recent increase follows a decline, and it is related to pricing decisions. Over the five days since July 18, the ex-factory prices of urea produced by manufacturers in Shanxi, Hebei, Shanxi, Jiangsu, and Anhui in Shandong have dropped by 20–60 yuan per ton. A new round of price declines for urea has just begun, which is in line with the price trends for urea during the middle and late months of July in previous years. But surprisingly, just a few days after the price drop, today the ex-factory prices of urea from some manufacturers in Shandong and Shanxi have actually increased by 10–20 yuan per ton. Price drops are a normal occurrence during the off-season, and it makes sense for prices to rise after a drop. Firstly, the period of lowest demand for fertilizers in summer within the country is coming to an end. The operating rates of compound fertilizer manufacturers have been rising steadily for nearly a month now; although the percentage increase each week is small, the inventory of compound fertilizers available during spring and summer has been almost completely used up. With policies related to fertilizers being introduced in autumn and orders being placed earlier than in previous years, it is inevitable that manufacturing activities will resume. Given the presence of local outbreaks, it is likely that both suppliers and customers agree on the need to start production and distribute products ahead of time. Compound fertilizer manufacturers can thus exert some pressure on urea prices ； As a certain amount of urea from Inner Mongolia and Xinjiang arrived in the Linyi area of Shandong during the second half of last week, urea producers there reduced their prices. It is understandable that they have now raised their quotes tentatively today, after receiving a sufficient number of orders. Board factories are seeing slow operations in the summer, especially due to a poor economic environment. With rainfall in many areas and low temperatures at present, although exports of plywood are recovering slowly, domestic demand is somewhat better, and board factories are about to start purchasing urea again. Agri-business dealers, for example, given that prices are already more than 200 points lower than they were during the same period last year and that prices tend to rise once they fall, may find it risky not to purchase goods, and might therefore be tempted to do so. Secondly, export conditions are fairly good. The current focus is on the bidding process; the final results of this bidding round, which concluded on July 17, are likely to be unsatisfactory. The lowest bid on the East Coast was 240.75 dollars per ton (FOB), representing an increase of only 3.4 dollars per ton compared to the previous month’s bidding, and it’s possible that this bidding round will end with only 119,500 tons being awarded to bidders ； The good news is that sales in India are performing well; India may soon issue new procurement tenders, and the delivery date could be extended to mid-September, giving China’s urea manufacturers new hope. In our country, the volume of small-scale orders is not large, but the prices are acceptable. A notable example is the bidding price in India in June, which caused the price of urea in Inner Mongolia to drop to around 1350–1360 yuan per ton at the factory level, reaching a bottom point there; this level was maintained for a considerable period of time. This time, the bidding price in India is slightly lower than 1500 yuan per ton, which is likely to result in factory prices in regions such as Shandong remaining around 1500 yuan per ton. Alternatively, considering the next bidding round in India, factory prices in Shandong might stabilize at a level slightly above 1500 yuan per ton. Once again, the supply is slightly high, but it has not reached its highest level yet. Daily production of over 165,000 tons is likely to occur only in mid-August. In the first half of July, daily urea production was around 145,000–150,000 tons; it has just recently returned to around 155,000 tons. The impact of this high supply is likely to become apparent a little later. In the short term, urea manufacturers do not face too much inventory pressure, so prices can rise as soon as they fall. Finally, capital poured into the fertilizer market, to a greater extent than expected. Today’s limit-up in the price of urea futures is a good example of this: with the overall economic situation being poor and there being a lack of good investment opportunities for funds both domestically and internationally, fertilizers and grains naturally become areas of focus for some investors, which further makes the already volatile price of urea even more unpredictable. In short, in the volatile urea market, if prices are driven too high, they are prone to plummet; with moderate speculation, prices can remain at higher levels. Customers with essential needs should act promptly, while those without such urgent needs should approach this situation wisely. (Cheyan Hong)