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Urea Prices Officially Drop; Winter Stockpiling Remains Uncertain Author/Source: China Fertilizer Network Date: 2020-09-07 Clicks: 5 In early September, the autumn fertilizer market reached a critical point; demand for compound fertilizers in most regions began to emerge, with existing orders arriving while new orders were also ready to be placed. Currently, the overall progress of the autumn wheat fertilizer market is around 70%. Compared to the same period last year, the market progress is slightly slower and trading activity remains moderate; however, most companies say that the total sales volume at this stage is roughly on par. As the autumn wheat fertilizer market approaches its conclusion, plans are being made to determine prices and policies related to winter storage. When it comes to the winter storage market, most market participants are worried. After the first round of stockpiling of fertilizers in autumn, the price of raw urea increased, which to some extent supported the prices of compound fertilizers in the following period. However, the prices of compound fertilizers did not rise as expected, and companies adopted a cautious approach, choosing to maintain stable prices and wait for market developments. Now, as the positive effects of recent developments start to take effect, the domestic urea market is once again facing a challenging situation, with prices in certain areas dropping slightly repeatedly. During autumn and winter, domestic demand for urea is relatively low to begin with, and in terms of the export market, it will be difficult for India to make large-scale purchases in the short term. If urea demand remains weak, the already uncertain winter storage market will become even more uncertain. First, it is difficult to determine winter storage prices. As early as the beginning of August, a few compound fertilizer manufacturers had already announced prices for winter storage and started collecting payments; some of these companies offered relatively low prices, which were even quite surprising in some cases. However, after these short-term advance payments, those relatively low winter storage prices gradually disappeared, and nowadays most manufacturers adopt a policy of charging interest rather than fixing prices. The cancellation of the initial winter storage price quotes also indicates to some extent that companies still face cost pressures and have limited confidence in predicting future trends for raw materials. Given the current situation in the raw material market, it is indeed difficult to determine winter storage prices. Although urea prices have dropped, the exact extent of this decline still needs to be assessed. The fluctuations in the prices of ammonium nitrogen and potassium fertilizers further add to the uncertainty, and until the raw material market stabilizes, compound fertilizer manufacturers can only choose to wait and observe. Secondly, winter storage demand is unstable. In recent years, the atmosphere surrounding winter storage has become increasingly sluggish in various regions, especially in the Northeast. As the largest market for winter storage, this area naturally attracts a lot of attention from compound fertilizer manufacturers. However, with the size of this market remaining constant while the number of people seeking to share in it keeps increasing, competition in the winter storage market in the Northeast has become extremely fierce. For distributors, not only the level of prices for winter storage but also future market prospects are of great importance. Starting from the onset of winter storage in November and up until official sales begin in April of the following year, there is nearly half a year of a gap during which fertilizer prices can very likely change. As a result, there are many uncertainties in the winter storage market; taking these risks into account, distributors tend to proceed with caution. Finally, attitudes toward winter storage vary. In fact, for the compound fertilizer market in any season, while raw material prices and downstream demand are certainly important, market sentiment is also of great significance. Another major reason why winter stockpiling has become difficult in recent years is the negative attitude towards such stockpiling. As mentioned above, the risks associated with winter stockpiling are increasing, and there are also many issues related to market prices; \"price wars\" are widespread. In order to secure a share of this winter stockpiling market, many companies drastically reduce their profit margins and use low prices to attract customers, which makes it difficult for those companies with weaker raw material advantages to compete with them ； Furthermore, differentiated products are becoming increasingly common; the prices of conventional compound fertilizers are relatively transparent. While differentiated products bring market influence, they also enable higher profits. As a result, once the conventional market is disrupted, the attitudes of downstream players become even more uncertain. In summary, urea is expected to start falling in price, which may lead to a delay in setting prices for winter storage. However, if urea prices can stabilize over the short term, this will reduce the obstacles to determining winter storage prices, thereby facilitating the finalization of the main trends for winter storage. (Feng Hongyang)