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Urea Prices Rise: A Test Before Official Pricing _ Author/Source: China Fertilizer Network Date: 2020-09-18 Clicks: 8 Urea has always been shrouded in mystery, and its prices can change suddenly. The industry has become accustomed to frequent fluctuations in urea prices. Recently, however, urea prices have shifted away from their weak trend; whether due to restrictions on shipments at ports or weak domestic demand, prices have risen slightly. This increase is mainly driven by small-scale agricultural purchases in regions such as North China and Central China, as well as reduced production by a major urea manufacturer in East China. Nevertheless, there is still room for negotiation regarding prices in the southwest region, and the industry remains pessimistic. According to other reports, the tender in India, which was originally scheduled for the middle to late part of this month, might be postponed to October. Domestic urea producers can only rely on these limited positive factors; could this be seen as a way to gauge the situation ahead of future tenders in India? Enterprise urea prices have seen a slight increase, but large agricultural suppliers remain cautious in their purchases, increasing their stock levels only to a limited extent; most of them continue to purchase as needed. At the grassroots level, there is still a situation where goods are available but not readily available for purchase, or transactions occur on a sporadic basis. Currently, the main ex-factory price of urea in Hebei region has risen to around 1,710–1,750 yuan per ton. In Linyi, Shandong, fertilizer manufacturers are offering a purchase price for urea of 1,720 yuan per ton. In some areas of Jiangsu, wholesale prices have increased by 10–20 yuan per ton, reaching 1,710 yuan per ton; however, there is supply despite these prices, and traders express concern, approaching purchases with caution. Next, the trend of urea prices and the progress of the printing marks are key points of concern in the industry, and they need to be examined from both supply and demand perspectives. Firstly, urea manufacturers are operating at high capacity levels, resulting in high daily production volumes. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises is around 57.03%, with a daily production volume of approximately 160,000 tons. If the production volume of urea manufacturers were to decline significantly, then an increase in urea prices would be easy to achieve. However, things did not turn out that way. One of the reasons for the rise in urea prices is related to maintenance work on some of the urea production units at a large factory in Shandong; but such maintenance is only temporary, and no other manufacturers have plans to halt production for maintenance at the moment – it’s just temporary maintenance at individual companies ； Furthermore, the liquid ammonia market is experiencing a split between the north and south regions; the markets in Hebei, Henan, Shandong, and Shanxi are operating poorly, with prices dropping significantly. Companies are under considerable pressure, and it is possible that some of them may shift their production focus to urea – for example, a factory in Hebei is ready to adjust its production facilities for liquid ammonia and urea as needed ； Once the maintenance work at a major urea production plant in Shandong is fully completed, production will resume increasing, and it is expected that there will be no frequent maintenance activities thereafter. Secondly, demand in the industrial and agricultural sectors is weak, providing limited support for the recovery of urea prices. Fertilizer is used only sporadically in some areas of agriculture, and the overall volume of purchases is limited; it is off-season in the agricultural market. After all, autumn is the peak season for phosphate fertilizers. Moreover, looking at the trend of low-level stockpiling in recent years, urea presents higher operational risks and is available in ample supply, so it is not a preferred choice for such stockpiling practices; traders tend to purchase it as needed ； In the industrial sector, the operating rate of compound fertilizer manufacturers remains low at around 53%. Although large companies continue to produce at a considerable level, they purchase raw materials as needed. Most small and medium-sized enterprises have low production levels or have stopped operations with no plans to resume production yet, resulting in limited demand for the raw material urea ； The operation level of plywood factories remains low, and there are few expectations of a significant increase in their operational activity in the future; as a result, the increase in demand for urea will also be limited ； Large traders are also cautious about purchasing urea, typically proceeding with back-to-back transactions; however, driven by recent slight increases in urea prices, their purchasing volumes have increased slightly. Once again, international market conditions provide a certain degree of support for the domestic urea market. The supporting factors are international prices and the supply of urea for export with shipment dates on October 5, as well as the slight improvement in the shipment of fertilizers from Yantai Port recently ； However, the biggest challenge at present remains the fact that restrictions on port shipments have not been fully eased; there is a large backlog of urea in the ports, which hinders domestic urea exports ； According to the latest updates, the next round of printing of labels may be postponed until after the November holiday, which means that the domestic market will lack support until then. In summary, in the short term, supported by lower production levels and occasional sporadic purchases, the urea market is expected to become somewhat more active, with prices rising slightly. However, in the long run, there are still no positive factors at play; it is still too early to speculate about the next bidding process in India ； It is expected that the urea market will remain in a cautious consolidation phase in the short term, with no significant changes likely. (Tan Junying)