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Urea prices surge sharply – A timely development Author/Source: China Fertilizer Network Date: 2020-08-06 Clicks: 12 As August arrived, the fertilizer market was full of interesting developments and ongoing hot topics. Among these, the most notable was the reverse trend in urea prices; domestic manufacturers raised their quotes. As of now, the standard export price for small-grain urea in Shandong Province is 1670–1680 yuan per ton, and this upward trend is likely to continue in the short term, bringing a real surprise to a market that is usually in a downturn period. Urea prices have risen this time; although external factors play a significant role, the timing is just right. Within a month, India issued three tenders for urea in succession, and the bid prices kept rising in each case, far exceeding expectations. Domestic demand for urea was already declining, yet the supply volume remained largely unchanged. Although the urea tenders in India presented difficulties, Chinese suppliers still participated in them, **which reduced the supply-demand pressure in the domestic market and allowed urea manufacturers to maintain their prices. The rise in urea prices is described by some as \"unusual,\" and there are also pessimistic views regarding the future market trend. However, at present it is the peak period for the domestic autumn compound fertilizer market, and the improvement in urea prices has served as a boost for this already challenging market. It is believed that with this support, the market situation in the second half of the autumn fertilizer season could be quite promising. Firstly, cost support is more stable. Since the launch of autumn fertilizers, the cost of their raw materials has remained relatively low compared to the same period last year. This is the main reason why prices for autumn wheat fertilizers have stayed low across various companies this year. As the market has progressed, fluctuations in raw material costs have been minimal, resulting in relatively stable prices for autumn fertilizers. With the exception of a few products whose prices are low due to high demand, most prices remain at normal levels. Currently, the prices of phosphorus and potassium fertilizers are more stable than those of urea; urea has not decreased as expected but instead increased in price. This provides a rare positive factor for the costs of compound fertilizers. Since costs are not expected to drop in the short term, there are fewer reasons for a decrease in the prices of compound fertilizers. Prices for wheat fertilizers are likely to remain stable in the latter part of the year. Secondly, the remaining demand will eventually be released. Regarding the demand for fertilizers this autumn, many people are not very optimistic, and the reasons are more or less the same. As of now, the progress in the wheat fertilizer market in some areas is around 50%, which means that half of the remaining demand still needs to be met. In fact, it’s not that demand has decreased, but rather that it is delayed. One reason is that it takes some time to determine the appropriate prices; companies not only need to consider their own profit margins but also need to adjust according to the attitudes of their downstream customers. Once the prices are set, they are not changed easily, as that could affect the timing of purchases by those downstream customers ； The second reason is that downstream buyers have moved away from the previous patterns of stockpiling, showing greater caution; in the face of market fluctuations or pessimistic forecasts, they maintain a rational approach to purchasing and proceed step by step. Finally, the winter storage markets are on par. The situation in the compound fertilizer market is reminiscent of the summer and autumn periods. With the autumn fertilizer market not yet fully over, winter storage activities have already begun \"secretly\" in some areas. The Northeast region, which has the highest demand for winter storage, is at the forefront of this trend. Recently, some companies have announced relevant pricing and advance payment policies for winter storage in the Northeast, with prices dropping significantly compared to previous years. The earlier start date for winter storage means that competition in this year’s winter storage market will be fierce. However, this also helps to accelerate the development of the autumn market; if the autumn fertilizer sales are not concluded in time, the winter storage market cannot fully emerge. Rather than saying that the early start of winter storage is an attempt by companies to gain a competitive edge, it is more accurate to say it serves to help bring an end to autumn fertilizer sales more smoothly. In summary, urea prices are seeing frequent increases, and this upward trend is likely to continue in the short term. The possibility of a decrease in the prices of compound fertilizers during the autumn season is low. Distributors will start ordering goods in the near future, and it is expected that there will be a slight surge in prices in the middle to late part of this period. (Feng Hongyang)