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Urea weakens: Will diammonium prices rise further? Author/Source: China Fertilizer Network Date: 2020-08-17 Clicks: 10 When it comes to the most prominent product in the fertilizer market at the beginning of August, urea must be mentioned. Driven by favorable pricing trends, urea prices have been rising steadily; however, there is currently no demand for urea in the domestic market, and downstream distributors are adopting a wait-and-see attitude toward these price increases, resulting in few new orders being placed. According to investigations by China Fertilizer Network, some manufacturers have already begun to lower their prices – could this be a sign of an impending market collapse? If there really is a collapse, can diammonium phosphate rise again? Currently, the prevailing ex-plant price for 64% diammonium phosphate in Hubei is 2200–2250 yuan per ton (the same unit is used thereafter). Major manufacturers in the southwest offer a price of 2450–2500 yuan per ton for 64% diammonium phosphate when it arrives in North China, while the price for 57% diammonium phosphate at delivery points is 2200 yuan per ton. The autumn market has already started, but there is modest enthusiasm among downstream buyers to place orders. The prices for orders placed in the early stages are low, and the wholesale prices offered by distributors fluctuate roughly around the current factory quotes. Even so, some factories still say they will raise their prices again at the end of the month. What gives diammonium phosphate such confidence? Is it really ready? Firstly, there is a large volume of goods awaiting shipment, while available supply for sale is limited. The autumn wheat fertilizer market is traditionally the main arena for diammonium phosphate; currently, some companies have orders due by mid-September, and they have already begun to limit new orders. Such a start to the autumn market came as a surprise to almost all industry insiders; so where did all these pending orders for diammonium come from? On the one hand, due to low prices of raw materials, the price of diammonium phosphate remained low after the spring market closed; in July, some downstream distributors began to purchase fertilizer in bulk at lower prices ； On the other hand, due to the impact of the pandemic, domestic production of diammonium phosphate in countries such as India has declined, increasing the demand for supplies from China. As a result, since last month, the number of orders awaiting fulfillment among China’s diammonium phosphate manufacturers has remained high; there have been frequent instances of restrictions on accepting new orders, and the sales pressure on these companies is at its lowest level in recent years. Secondly, export prices continue to rise. Urea was the factor that drove the previous price increase of around 100 yuan per ton, thanks to tenders in India; although diammonium phosphate did not see such a sharp rise as urea, export conditions also became one of the main factors contributing to the price increase. Unlike in previous years when companies were forced to gather goods in ports waiting to export in order to alleviate domestic supply pressures, currently the offshore price of around $323 is roughly on par with the domestic selling prices at the time of production for some companies. Some companies have orders ready for export that are scheduled for delivery in September, and there is broad optimism regarding both prices and volumes in the future. Finally, demand is high in autumn. The wheat fertilizer market is dominated by diammonium phosphate and compound fertilizers; currently, downstream distributors have begun to stock up, and the trading atmosphere in the market is gradually improving. The low-priced diammonium phosphate that arrived in the earlier periods is being gradually consumed, while the prices of the supply arriving later continue to rise. Coupled with factories’ firm willingness to raise prices due to a large backlog of goods awaiting shipment, there is still room for further increases in the price of diammonium phosphate. In summary, the bubble associated with rising urea prices is about to burst, while diammonium phosphate, supported by domestic and international demand, is likely to see further modest price increases in the future. (Rong Guangwen)