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“The “troublemaking” urea has finally seen a price drop. Author/Source: China Fertilizer Network. Date: August 21, 2020. Click-through rate: 5. Since late July, India has issued four tenders. Even though domestic industrial and agricultural demand in China remains weak, urea has stood out as a exceptional product; its price has been repeatedly raised, leading to a significant upward price trend. Of course, riding on the momentum of urea, there have been certain adjustments in related fertilizers and downstream fertilizer products. For instance, driven by the high prices of urea, although the price of ammonium chloride—a type of nitrogen fertilizer—has seen a slight dip in some areas, it remains relatively stable overall. However, compound fertilizer manufacturers find themselves in a dilemma due to the rising urea prices. The sales pace of compound fertilizers at the end-user level has been slow; this year, in particular, rainfall and other weather conditions have led to a decrease in fertilizer usage in certain regions, affecting compound fertilizer demand as well. These manufacturers are under significant cost pressure, while urea prices continue to remain at elevated levels. Supported by printing marks, urea prices saw only a slight decline. However, recently, due to a convergence of factors such as port loading restrictions and weak domestic demand, urea prices—which had been quite volatile—eventually decreased. Although India’s fourth tender has just been officially announced, unlike the previous three tenders, the urea market in our country has not seen prices rise due to speculation related to this Indian tender. Whether it is difficulties in unloading at ports or the long time until shipment, urea prices in many areas have dropped by around 100 yuan per ton. For example, the current average ex-factory price of urea in Henan is around 1620–1660 yuan per ton, while in Shanxi it is around 1580 yuan per ton; moreover, some deals still allow for further discounts. For urea manufacturers, they are well aware of the demand for urea in the domestic market. However, with India’s re-tendering process underway, and the impact of this on urea prices still unclear, whether prices will rise due to speculation or fall as a result of rational factors has become a focus of concern within the industry. Firstly, the operating levels of urea production plants show little fluctuation. Apart from short-term maintenance activities on certain units at a few of these plants, no company has indicated any plans for extensive or long-term shutdowns for maintenance, which means that there will be no significant changes in the operating levels of urea production plants in the short term. According to statistics from China Fertilizer Network, the overall industry utilization rate for urea production plants is currently around 54.15%, with a daily production volume of around 152,000 tons ； Additionally, the price of liquid ammonia is currently showing slight fluctuations, with a polarized trend in prices. In some areas, it is also affected by the low prices of imported ammonia; as a result, the price of liquid ammonia in those regions does not have a significant advantage over that of urea. Therefore, the focus may shift slightly toward urea. However, most companies still prioritize the production of liquid ammonia, so this does not have much impact on their urea production activities. Secondly, with weak demand in the domestic industrial and agricultural sectors, the trend for urea is actually bearish. In the agricultural sector, there are only occasional small orders; the local markets already have low demand for urea, and there is particular resistance to high-priced urea, with a tendency to wait and see. Additionally, in some areas in the south, weather conditions such as rainfall have led to delays or reductions in demand ； The recent fluctuations in urea prices, with increases followed by declines, have led large agrochemical suppliers to adopt a more cautious approach of purchasing only as needed. Although some of these large agrochemical companies believe that, supported by international market conditions, urea is still favorable for the domestic market trend, the positive factors are insufficient, so they continue to adopt a cautious strategy of buying at high prices and selling at even higher prices ； The operating rate of industrial compound fertilizer manufacturers is not high; moreover, some of these manufacturers stopped production or reduced their output in advance due to the sharp rise in urea prices. In addition, sales of finished fertilizers are poor, and the high cost pressures result in low enthusiasm for production ； The overall operation level of plywood factories remains low, resulting in limited purchases of urea as well. The re-export market is the biggest expectation for the domestic urea market. India issues tenders frequently, which indicates a significant demand gap; this supports China’s urea exports. Some companies are thus keen to raise prices, but it is still necessary to wait for improvements and resolutions regarding port loading restrictions. In conclusion, at present, although the operating capacity of urea manufacturers in China is not high, there is no clear trend toward a decline in this capacity. Meanwhile, demand remains weak. Additionally, the high-priced urea purchased by traders in the earlier stages needs to be sold off, and reliance solely on exports is not sufficient to address this situation ； It is expected that there will still be some downward pressure on transactions in the urea market in the short term. (Tan Junying)