Thread Content
Urea prices rise in the off-season – what exactly is driving this? Author/Source: China Fertilizer Network Date: 2020-09-11 Clicks: 11 After the 9th, there was no surge in shipments to the ports, and the hopes of many urea manufacturers to raise their prices taking advantage of the new restrictions at Yantai Port were not realized. However, based on the recent trend in urea prices, prices have risen slightly in some areas. Currently, the average ex-factory price of urea in Shandong is between 1,640 and 1,680 yuan per ton. In Linyi, compound fertilizer manufacturers are purchasing urea at 1,660–1,670 yuan per ton, which translates to an approximate ex-factory price of 1,610 yuan in that region. In Hebei, the average ex-factory price of urea is between 1,690 and 1,750 yuan, with a negotiation margin of around 40 yuan. In Henan, the average ex-factory price is between 1,640 and 1,650 yuan, with a reference price of 1,600–1,620 yuan. The daily supply of urea in that region is 13,000 tons. In Shanxi, the average ex-factory price of urea is 1,540 yuan, while large-grained urea costs 1,570 yuan. Although the domestic market performance remains mediocre, prices have seen some rebound. The main reasons for this are as follows: First, there has been a slight reduction in supply. Recently, some enterprises in Inner Mongolia as well as in Henan have put their facilities on temporary maintenance. Although the total duration of these maintenance periods is not very long, it has indeed helped to reduce supply pressures in the short term. According to China Fertilizer Network, the current daily production volume of urea across the country is 156,000 tons, which is nearly 10,000 tons less than the level at the end of last week. This decrease in production gives urea manufacturers more leverage at present; some companies with lower production volumes have taken the opportunity to raise their prices. Moreover, since there is a fixed supply to certain customers, the reduction in overall supply volume is not significant. Secondly, implement a tentative price increase to observe the feedback from the downstream market. Recently, as the production of autumn fertilizers has entered its middle and later stages, the actual demand for urea in the market has become relatively low. Although there are orders awaiting shipment abroad, given the loading and unloading capacity of ports in northern China, it is less likely that large quantities of urea will be gathered at these ports. At present, the price of urea is higher outside China than inside; although companies are forced to sell it domestically due to supply pressures, the potential demand from winter storage markets in China in the future is quite high. Companies are raising prices tentatively, not necessarily in order to enter the market at higher prices, but rather to gauge the reaction of downstream markets and to lay the groundwork for future market conditions. Finally, use the upward trend to promote stability and wait for the market to pick up later. Some industry insiders say that the demand for urea in the domestic market is currently low, and some end-users insist on waiting until prices rise before making purchases. Although this price increase is not guaranteed, it can still help some distributors to sell their products. Once the goods reach lower-level markets, the demand from those distributors will become apparent, thereby helping to stabilize the situation through higher prices. In summary, the demand for urea in the domestic market is relatively weak at present, but there are indeed orders waiting to be shipped from the ports. The industry believes that urea prices are likely to show signs of decline. However, as supply levels have decreased compared to earlier periods, the extent of this price drop is expected to be limited. Moreover, if India conducts further tenders in the near future, there is a possibility of a price rebound.