Thread Content
Weak domestic demand: Drop in urea prices, slight increase in ammonium chloride prices. Author/Source: China Fertilizer Network. Date: 2020-08-17. Clicks: 10. In the past, whenever there were tenders for urea, prices would rise as a result of speculation, though the increase was usually limited and short-lived. However, over the course of this little over a month, three tenders issued by India led to continuous rises in urea prices. To date, domestic urea prices remain high; for example, the average ex-factory price of urea in Shandong is around 1750–1790 yuan per ton, while a factory in the Northeast offers small-grained urea at an ex-factory price of 1620 yuan per ton； However, even though urea prices continue to rise, it is not possible to rely entirely on the international market; ultimately, one must return to reality. Currently, it is the off-season for agricultural use in China, and there is a supply surplus in the wholesale market. Downstream users are reluctant to purchase urea at high prices, which means that the sales of urea do not keep up with the pace of price increases, and the high-price trend has cooled down. The ammonium chloride market, which relies on urea to support prices, is performing weakly; there is little new business from companies, and prices have also seen a slight decline. Currently, domestic ammonium chloride manufacturers are maintaining firm pricing, though there are slight declines in some cases. While most prices remain stable, there is a slight softening in transactions in certain areas. These companies have a certain amount of orders awaiting shipment to support their operations, but it is currently off-season, resulting in low demand for new orders. According to China Fertilizer Network, the current mainstream ex-factory price for wet ammonium in the East China region is around 500–530 yuan per ton, while the price for high-quality grades is 540–550 yuan per ton. The mainstream ex-factory price for dry ammonium is around 600–620 yuan per ton, with slight discounts available in transactions. Currently, the market for wet ammonium remains stronger than that for dry ammonium, and sales proceed more smoothly. In addition to the support provided by urea, industry insiders are focusing on the supply and demand dynamics of ammonium chloride itself. On the one hand, over 70% of ammonium chloride manufacturers are in operation, which increases the risk of higher inventory pressure for these companies. At present, the ammonium chloride production unit at a factory in Shaanxi has been shut down and is set to resume operations at the end of the month; a large factory in Sichuan is operating at 60-70% capacity. As for another company that stopped producing ammonium chloride, there are few prospects for it to resume operations. In addition to those companies that have been shut down for extended periods, all other caustic soda-producing enterprises are operating at high levels. This is due, firstly, to the rebound in the price of caustic soda, which boosts companies’ enthusiasm for production; Secondly, the periodic maintenance campaigns among these companies have already been completed, with no plans for such maintenance in the short term. According to statistics from China Fertilizer Network, as of now the overall operational rate of ammonium chloride production enterprises is around 73.6%, with a daily production volume of approximately 38,600 tons. Under these high-capacity conditions, inventory levels may increase. On the other hand, it is a slow season for demand; downstream buyers are cautious and delay making purchases, resulting in few new orders being closed. According to statistics from China Fertilizer Network, the overall operational rate of compound fertilizer manufacturers is around 60%; most small and medium-sized companies in this sector have a lower level of operation. The reason for this is that the sales of their finished products are not going well, inventory levels are high, and there is little enthusiasm for production, which leads to delays in purchasing raw materials ； Secondly, the operating capacity of enterprises that produce ammonium chloride in pellet form is also at a low level, and the amount of ammonium chloride raw material purchased is not large either ； Thirdly, in some markets in the south, high temperatures forced a few composite fertilizer and extruded pellet manufacturers to suspend production. Meanwhile, in certain end-market areas, rainfall led to delays in the use of fertilizers, resulting in reduced consumption. However, the ammonium chloride market still has several positive factors supporting it. First is the support from the export market: in the first half of the year, China’s exports of ammonium chloride used in fertilizers, as well as nitrogen-phosphorus compound fertilizers, were considerable. Recently, some traders have said that although export volumes have slowed down, they have helped to absorb the excess production in the domestic market to some extent ； Secondly, fertilizer manufacturers have limited stock of ammonium chloride raw material; once demand increases, sales volumes are expected to rise. Overall, the urea market has seen its prices rise repeatedly thanks to weak domestic demand and favorable export conditions; however, resistance from the domestic downstream market is increasing. In the long term, this will also have a negative impact on ammonium chloride. At the same time, ammonium chloride is characterized by an oversupply and weak demand, so it is expected that its market condition will remain weak in the short term, with expectations resting on an increase in demand in the future. (Tan Junying)