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Rising urea prices: No hasty winter stockpiling needed _ Author/Source: China Fertilizer Network Date: 2020-09-21 Clicks: 8. Currently, the average ex-factory price of urea in Shandong is 1,700 yuan per ton (the same unit applies below). In Linyi, compound fertilizer manufacturers are purchasing urea at 1,720 yuan per ton, with the local daily supply amounting to around 19,000 tons. In Hebei, the average ex-factory price of urea ranges from 1,710 to 1,750 yuan per ton; these prices remain stable for now, with room for negotiation of 20–40 yuan per ton. In Shanxi, the average ex-factory price of urea is 1,565–1,575 yuan per ton, while large-grain urea costs 1,620 yuan per ton. Although urea prices are not showing strong upward trends at present, there is a slight upward trend overall. Downstream traders in the Northeast and some other regions have relatively less inventory left from last spring, and coupled with frequent tenders in India, domestic urea prices remain relatively strong. Some downstream customers have begun to purchase urea in appropriate amounts for winter stockpiling. However, given the current situation, some downstream markets are not yet suitable for initiating winter stockpiling efforts. Firstly, the current price is still on the high side. Although urea prices remain high in many regions at present, the industry is awaiting tenders in India as well as a tender for 300,000 tons in Bangladesh. With a large volume of exports pending shipment, most companies do not face significant pressure regarding the flow of their goods at the moment. However, the tender process in India has not started yet, and the National Day holiday is approaching soon. If no tender is issued before the holiday, the latest shipping date specified in India was October 5th; this means that during the National Day period, the ability of urea manufacturers to export goods will be extremely limited. It is likely that some of these manufacturers will reduce prices in order to attract orders that need to be shipped during that time, which would mean that prices might be higher compared to the current level. Secondly, the market supply volume may increase in the later stage. According to recent developments in the urea market, some urea production facilities are currently under temporary maintenance due to equipment issues. However, so far there have been no cases of production restrictions imposed for environmental reasons or shortages of natural gas that would force factories to stop operating, as was the case during the same period last year. Urea producers in Xinjiang say that restrictions on natural gas supply may be lifted this year. Apart from a few equipment problems, the operation of most urea production facilities remains stable, and those that were shut down or have new facilities are gradually resuming production. At present, the daily domestic production of urea already reaches 160,000 tons, and supply is likely to continue increasing in the future, with prices possibly falling as well. Finally, a prolonged holding period carries relatively high risks. To date, this year the price difference between high and low prices for urea has been around 500 yuan. Due to certain force majeure factors, there is still a possibility of fluctuations in urea prices in the fourth quarter of this year. Those who rush to stock up for winter storage may see their profits reduced; it is therefore wise to act with caution. In summary, there is indeed a possibility of an increase in urea prices at the current stage. Once tenders are launched in India and Bangladesh, urea prices in China are likely to rise further. For downstream compound fertilizer manufacturers, purchasing urea at lower prices during the early stages and now still allows them to maintain a certain level of risk resistance, which also helps them set appropriate prices for their winter stockpiles. However, for some traders in the agricultural sector as well as small and medium-sized distributors, storing urea for winter use presents significant risks at this time; it is advised to be cautious and wait until factors such as environmental regulations, gas restrictions, and increased production take effect before making purchases. (Wu Wenchao)