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Urea: Port loading restrictions remain in place; crisis shifts to domestic market Author/Source: China Fertilizer Network Date: 2020-09-14 Clicks: 6 The domestic urea market is in a off-season period; there is supply but no demand in rural agricultural areas, and industrial demand is weak. Overall, caution prevails in terms of demand. Meanwhile, driven by successive tenders in India, the international market has seen increasing demand, leading to rising prices for urea in China. However, as those Indian tenders are now behind us, urea prices have returned to stability and declined in a rational manner； Recently, the urea market has experienced volatility; some companies have raised prices by 10 yuan per ton, but actual sales at the retail level remain weak. There are still unresolved issues, namely the restrictions on cargo volume at ports. These restrictions have not been lifted yet, resulting in high inventory levels at ports, difficulties in loading and unloading, and problems with exports. The industry is concerned about the risk of urea returning to domestic markets in China, which could lead to a crisis in that market. Although export demand is promising, port handling operations are hindered. The scheduled shipping dates for the first two shipments marked with Indian codes were September 15 and October 5 respectively. However, current urea inventory levels in various ports are high, and ports such as Tianjin Port and Yantai Port continue to impose loading restrictions. These restrictions are likely to be lifted by the 20th of this month, though further restrictions cannot be ruled out. Strong demand from the international market is favorable for domestic urea prices, but exports face pressure, bringing us one step closer to a decline in prices. Urea plant operations remain at high levels, and supply will continue to increase in the coming period. Some urea-producing enterprises in Inner Mongolia have stopped operations, and a few others have reduced their production capacity, but the majority of these enterprises are operating as normal. Some urea production facilities in the Northeast and Inner Mongolia are preparing to resume operations or have just done so. According to statistics from China Fertilizer Network, as of now, the overall operational rate of urea-producing enterprises is around 55.56%, with a daily production volume of approximately 156,000 tons. Speaking of the operation of urea manufacturers, liquid ammonia comes into play. Currently, the liquid ammonia market is operating steadily, with prices showing slight fluctuations in some areas, but overall they remain at high levels. Moreover, demand for liquid ammonia in certain markets is expected to increase, which could lead to a slight rise in its prices. As a result, manufacturers will not focus as much on urea production, and the trend in liquid ammonia prices will provide support for urea prices. Without the positive outlook associated with the urea export market, demand for urea in the domestic market is weak, and expectations are pessimistic; markets at all levels are cautious. During the off-season for domestic agricultural demand, even limited purchases or additional orders are not sufficient to drive up urea prices; in the local markets, there is supply but no demand ； Large traders are generally pessimistic about the trend of urea prices, showing little enthusiasm for purchasing, and tend to buy only as needed ； Industrial compound fertilizer plants are operating at low levels, with some even seeing further declines. Coupled with slow sales of finished fertilizers, uncertain prices for winter storage, and volatile raw material markets, these plants are proceeding with caution in terms of production and procurement ； The same is true for plywood factories; with a weak market, companies lack enthusiasm for production, overall industry activity remains low, and the demand for urea is limited. However, there are still positive factors in the urea market. Firstly, demand for urea is increasing in certain areas; as the end of the month approaches, production at some compound fertilizer manufacturers is likely to pick up again, which should lead to increased purchases of urea as a raw material ； Secondly, once the restrictions on port loading are eased and exports are no longer hindered, the accumulated urea inventory in the ports will also be gradually utilized ； Thirdly, according to market rumors, India may issue another round of new tenders in the middle or late of this month, or at the beginning of next month, which presents opportunities for profit-taking in the domestic market. In summary, the imbalance between supply and demand in the urea market remains significant, which has led to a pessimistic attitude among industry players. It is expected that urea prices will remain weak in the short term, with only slight fluctuations in quotes; however, the actual transaction prices should see some easing. There is hope for the emergence of positive factors that could lead to an improvement in the urea market situation. (Tan Junying)