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Urea Faces Difficulties as Prices Drop; Ammonium Chloride Gains Momentum in the Northeast – All Eyes Turn There. Author/Source: China Fertilizer Network. Date: 2020-09-07. Clicks: 3. As expected, the urea market is in a difficult situation; manufacturers have increasing inventory levels, and the pressure to sell goods remains high due to restrictions at ports. The attitude within the industry has turned pessimistic, with poor domestic demand being another factor aside from export challenges. Currently, the domestic agricultural market is in off-season; only small amounts of purchases are being made at the local level, which provides little support to the overall market trend. Large traders purchase as needed ； Industrial compound fertilizer manufacturers are operating at low levels; in particular, small and medium-sized enterprises have either stopped production or reduced it, while larger companies are stocking raw materials as needed, or already have sufficient reserves. There is limited support from new orders ； Plywood factories are operating at a low level, resulting in low purchases of urea ； Meanwhile, urea manufacturers are operating at high capacity levels, resulting in an oversupply of supply. As the saying goes, \"when one prospers, all prosper; when one suffers, all suffer.\" Ammonium chloride, that minor nitrogen fertilizer, is also affected by the weak market conditions for urea. However, given the current situation of ammonium chloride itself, the impact of urea is quite limited. Currently, new orders for ammonium chloride manufacturers in many regions are weak; with operations running at high levels, inventory pressure has increased to some extent. Prices have also declined in recent times – for example, the delivery price of dry ammonium chloride in certain areas of Central China is around 600–620 yuan per ton, though actual transaction prices can be negotiated on a case-by-case basis ； As the market in the Northeast heats up, all ammonium chloride manufacturers with transportation advantages are heading there; as a result, some supplies of dry ammonium chloride from central and eastern China are arriving in large quantities. However, the influx of supplies from the South toward the North could also lead to frequent low prices, and thus the industry’s focus is on how supply and demand factors related to ammonium chloride will affect future price trends. Firstly, the soda ash market continued to heat up, with prices rising easily and continued optimism prevailing, which kept the operating rates of soda ash manufacturers at high levels. In the first half of the year, the inventory levels of caustic soda producers reached around 1.5 million tons. After prices bottomed out, prices started to rise in the second half of the year, and inventory levels dropped to around 850,000–900,000 tons. Moreover, most companies restricted orders and were reluctant to sell their products; the intensive production activities resulted in high levels of ammonium chloride production as well ； At present, a large ammonium chloride production plant in Sichuan has stopped operating, another plant in Yunnan has also ceased production, while a major plant in Jiangsu has temporarily suspended operations for 7–10 days. The remaining enterprises are operating at full capacity with no planned maintenance activities. According to statistics from China Fertilizer Network, the overall operational rate of the caustic soda industry as of now has dropped to around 64.8%. This rate is expected to increase once the maintenance work at these enterprises is completed ； Furthermore, when the company is profitable, it ensures a high price for soda ash; therefore, a slight decrease in the price of ammonium chloride is also not a big problem. Secondly, the overall demand for ammonium chloride is low during the off-season, which makes it difficult to support the trend in prices. The off-season for fertilizers in the agricultural market results in low levels of operation for companies that produce granular ammonium chloride; especially in autumn, high-phosphorus fertilizers are preferred, leaving limited demand for nitrogen fertilizers and nitrogen-based raw materials ； The inventory of finished fertilizers in industrial compound fertilizer plants is high. The winter storage market has not yet started, and prices and policies remain unclear. End-demand has also decreased due to some objective unforeseen factors. Sales progress for compound fertilizer companies is slow; owing to low operation rates, there is still some raw material purchased earlier that needs to be used up, and orders for new purchases are limited ； Traders are moving goods slowly; there are few new orders and progress is slow ； However, there is still optimism regarding demand in the Northeastern winter storage market. Once again, urea also affects the trend of ammonium chloride to a certain extent. Currently, nearly 60% of urea production facilities are in operation. With weak demand in both industrial and agricultural sectors, as well as disruptions in port transportation, exports are not proceeding smoothly, which puts pressure on domestic sales. Prices are showing a slow downward trend, which is unfavorable for ammonium chloride. In summary, the maintenance activities carried out by some ammonium chloride manufacturers in the southwest and Jiangsu regions are positive factors for future market trends. However, the overall production level in this industry remains high, and there is a certain amount of inventory at both upstream and downstream levels. Coupled with a weak demand period and low levels of inventory held by end-users, as well as a slow start to winter storage in the northeast region with limited demand, there is still an oversupply. In the short term, the market lacks positive driving forces, so it is expected that overall market conditions will remain weak. Local transaction prices may be on the low side to encourage purchases, while supply in the southwest region is likely to remain somewhat tight. (Tan Junying)