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Urea: Positive trends for individual products; price drops begin _ Author/Source: China Fertilizer Network Date: 2020-08-17 Clicks: 10 Urea has seen rising popularity recently, with overall prices soaring by over 100 yuan per ton. Urea futures have also reached price limits from time to time. The ex-factory price of high-quality urea in Shandong Province has risen to 1790 yuan, while in some areas of Hebei Province it has even reached 1860 yuan. Although it has happened before that urea prices increased by more than 100 yuan in just one week, such rises during the off-season in autumn are relatively rare. The successive tenders in the Indian market have caused markets around the world to witness such upward price movements during the off-season. However, recently domestic urea prices have started to decline slightly. Currently, the main ex-factory price of urea in Shandong Province is between 1750–1790 yuan per ton. In Linyi, compound fertilizer manufacturers pay between 1740–1760 yuan per ton for urea. In Hebei Province, the main ex-factory price is 1800 yuan per ton, while in Henan Province it is between 1720–1750 yuan per ton. In Shanxi Province, the main ex-factory price is 1630 yuan per ton. The main reasons behind this rapid change in market trends are as follows: First and foremost, the demand dynamics in India play a key role in determining these trends. Before these three recent tenders, international reports indicated that India faced a demand gap of 2 million tons for urea. The total volume tendered in the first two rounds was around 800,000 tons, while the total amount tendered this time was about 1.28 million tons. In terms of numbers, this amount just exceeds India’s current overall demand gap. However, in terms of price, the price of urea in the third tender was significantly higher than that in the previous two rounds. It is unlikely for India to be able to purchase all the urea offered in this tender, which raises the question of whether there will still be a demand gap in the Indian market and whether further tenders will be held. If tenders are conducted in the near future, it will be necessary to wait, as the international market, driven by these Indian tenders, has seen the offshore prices of urea rise by more than $20 in many exporting countries. If further tenders are held, prices are likely to continue rising, which is not favorable for the Indian market. Moreover, as the goods from previous tenders arrive at ports over time, the tight demand situation should ease somewhat ； On the other hand, those with pessimistic views believe that there could be attempts to cancel orders in India’s recent tender process; such cancellations would likely create significant supply pressures for urea in various regions, leading to a drop in prices. If tenders are held again after that, the cost pressures might decrease. Therefore, taking all of the above into account, the Indian market is full of uncertainties, and there may be signs of a decline in prices. Secondly, the domestic market has only positive factors. Although the current period is a peak season for production in the autumn fertilizer market, the proportion of urea is relatively low; moreover, some downstream compound fertilizer manufacturers still have large quantities of low-cost supplies available for use, so there is no shortage in supply for now ； At present, traders accept the increase in urea prices, but they are opposed to purchasing large quantities of urea at higher prices; instead, they engage in short-selling. Since they still have urea available at lower prices, the price increase by urea manufacturers represents an excellent opportunity for traders to raise their own prices. This allows them to recover funds quickly, while also achieving relatively higher profits ； At present, there is no demand in the agricultural markets in many areas; therefore, the available outlets for domestic urea are relatively limited. The price of urea rose too rapidly earlier on, resulting in a discrepancy between the prices set by factories and those set by traders. Once the temporary pricing restrictions were lifted, the price of domestic urea declined to some extent. In summary, at the current stage, due to the relatively limited number of positive factors domestically, there is a decrease in the flow of urea to various enterprises; urea at high prices shows signs of declining. Meanwhile, the price of urea in the consumer market may increase. It is expected that in the near future, urea prices in major regions will mainly trend downward, with only slight increases in market urea prices. Once these two price levels converge, prices will tend to stabilize. (Wu Wenchao)