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Urea prices will rise too, but is it holding things back? Author/Source: China Fertilizer Network Date: 2020-08-03 Clicks: 39 A topic that has remained highly relevant recently is the issue of \"printing specifications.\" As new \"additional\" conditions arise in connection with this process, they affect the fluctuations in the prices of urea futures and spot markets. Once these additional conditions are finalized, the details regarding the printing of specifications also become clearer. In the tender that concluded on July 30 in India, 13 bids were received, of which 10 met the requirements. The total quantity offered was 1.63 million tons. The lowest bid price was $259.59 per ton when delivered to the east coast ports, and $257.70 per ton for ports on the west coast. After deducting approximately $15 for shipping costs and other fees, the equivalent price on a FOB basis in China was $244.60. Therefore, there are currently opportunities for exporting urea both from the ports where it is gathered and from certain areas within China, and the price advantage in this case is considerable. Currently, domestic urea prices are rising due to the trend of taking advantage of current market conditions, with increases of around 20–40 yuan per ton. In terms of the magnitude of these increases, this price rise was smoother compared to previous bidding rounds; however, there are still concerns regarding the future trend of urea prices. Regardless of the various concerns and worries, urea prices have risen in many regions. In Hebei, the standard ex-factory price for urea is around 1650–1670 yuan per ton, while in Henan it is around 1590–1610 yuan per ton. As of yesterday, compound fertilizer manufacturers in Linyi, Shandong, were purchasing urea at a price of around 1650–1660 yuan per ton; however, the pace of procurement remains slow, indicating that there are still factors contributing to the rise in urea prices. Firstly, urea manufacturers do not currently have any planned, extensive maintenance activities on a long-term basis, which keeps the overall industry operation rate high. At present, a few urea production plants in regions such as Inner Mongolia, Hebei, and Anhui are undergoing maintenance work. A urea production facility in Shandong will start its scheduled maintenance on the 6th; all other plants are operating normally. Additionally, the new production capacity added in Shandong is set to begin delivering products within about a week. The urea plant in Anhui that is under maintenance also plans to resume operations. According to statistics from China Fertilizer Network, the overall operational rate of urea production plants as of now is around 55.85%, with a daily production volume of approximately 156,700 tons. This operational rate has increased significantly compared to previous periods, and it is expected to keep rising in the future ； Additionally, the market for liquid ammonia is currently weak with low prices, putting pressure on companies to sell their products. The high temperatures pose particular challenges for liquid ammonia manufacturers, and it is possible that some of them may decide to shift their production focus toward urea, whose market conditions are more favorable. Secondly, weak domestic demand is actually holding back the development of urea. The fertilizer market for agriculture is in its off-season; only small, sporadic orders are placed at the local level. Although there is a demand for wheat fertilizers in August, it is still limited, and autumn is the peak season for phosphate fertilizers. At present, the demand for urea in the industrial sector can somewhat fill the gap in the agricultural market, but industrial demand is also limited. Firstly, the overall operation rate of compound fertilizer manufacturers has only recovered to around 54.34%, while small and medium-sized enterprises continue to operate at a low level; these companies purchase urea as needed ； Second, the demand from plywood factories and power plants is not high ； Thirdly, large agricultural input suppliers make purchases based on their needs; especially since the price of urea is on the rise, such purchases are also short-term in nature, with no need for large-scale orders. Once again, international market conditions serve as a key factor contributing to the improvement in the domestic urea market in our country. Based on the prices mentioned earlier and the estimated quantity of urea that will be awarded contracts for in our country, which is around 250,000–350,000 tons, the current export price of urea from Inner Mongolia is around 1,440–1,460 yuan per ton. There is still an advantage in terms of exports, with the actual quantity of urea that will be awarded contracts for to be determined in the future. Finally, the market for ammonium chloride, a minor nitrogen fertilizer, has seen slight declines despite its overall strength; it is currently operating at a stable level. This has little impact on urea, and it isn’t enough to act as a hindrance. Overall, whether the increase in urea prices is the result of a \"long-planned\" strategy or a last-minute decision, the attitude within the industry is relatively optimistic. Supported by international market conditions and export prospects, the urea market is expected to continue to improve, with further price increases possible. However, domestic demand and new production capacity may act as constraints on the trend of urea prices, so it is likely that this wave of price increases will not last very long. (Tan Junying)