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Slight rise in urea prices under high pressure; any hope for ammonium chloride? Author/Source: China Fertilizer Network Date: 2020-09-21 Clicks: 7 Recently, urea prices have seen an unexpected slight increase, driven by local agricultural demand, which has also boosted optimism in the industry; major traders have increased their stockpiles to an appropriate level ； However, due to limited fertilizer availability at the agricultural grassroots level, there is often a supply despite high prices, prompting small and medium-sized traders to purchase only as needed ； Under the pressure of low industrial activity levels, as well as unresolved issues related to port transportation and capacity constraints, the increase in urea prices has shown little effectiveness. With the slight improvement in the urea market, there seems to be some hope for the weak ammonium chloride market. However, the supply and demand situation of ammonium chloride itself is currently the key factor determining its trend; relying solely on urea may not be enough to turn this hope into reality. At present, the ammonium chloride market is operating in a weak condition. While many companies maintain firm pricing, some still adopt a case-by-case negotiation approach; either there are slight reductions in prices for specific orders or transactions become slightly less rigid. In short, the ammonium chloride market lacks strength, and the reason for this is undoubtedly the low demand amid high production levels. The biggest difference this year compared to the same period last year is the absence of any guaranteed price policies, which has removed certain negative factors from the industry. Delivery progress in the Northeast region, which is currently of great interest, is slow, while supplies from other provinces are arriving actively. The reference price for mainstream deliveries is around 680–750 yuan per ton, with some prices subject to negotiation ； The ex-plant price of dry ammonium in central China is relatively low, at around 500 yuan per ton; only in Sichuan and Chongqing is the price of ammonium chloride relatively high, thanks to the low operating levels of local caustic soda manufacturers. However, the arrival prices in Guangdong, Guangxi, Yunnan, and Guizhou have seen a slight decline. Regarding the future trend of ammonium chloride, urea does play a certain role in this regard; however, based on the current market conditions for urea itself, its impact on ammonium chloride is likely to be limited. Currently, domestic urea prices have risen slightly, but the operating rate of downstream compound fertilizer manufacturers has dropped to around 51.29%. Raw material purchases are being made on a demand-driven basis and at reduced levels; large traders are operating cautiously and show little interest in building inventory reserves. In contrast, urea manufacturers continue to operate at high levels. While there may be some market activity in the short term, price increases will be limited, and the outlook for the long term is generally negative, resulting in weak support for ammonium chloride prices. The price of soda ash continued to rise unexpectedly, and companies focused entirely on the soda ash market; as a result, production levels will remain high for some time, ensuring high output of soda ash and consequently an increase in the production of ammonium chloride as well ； Some of the ammonium chloride production facilities in the southwestern region, which have been under scrutiny, plan to resume operations gradually next week and around mid-next month; as a result, industry activity will continue to increase. According to statistics from China Fertilizer Network, the overall operational rate of caustic soda producers is currently around 73.1%, and it is expected to rise to 75% or slightly higher by next month. No maintenance plans exist for the remaining facilities at present. Production at enterprises producing compound fertilizers and extruded ammonium chloride pellets remains low, and traders are also cautious about making purchases; some even combine their orders together, resulting in a lack of large-scale orders to support the market. Although compound fertilizer manufacturers have limited stockpiles of ammonium chloride as raw material, the overall production level in this industry is low, and purchases are made on a demand-based basis ； The operation rate of enterprises producing compressed ammonium chloride pellets is also low, especially in the fertilizer blending plants in the Northeast region, where purchasing volume of raw ammonium powder is limited ； Traders are generally bearish on ammonium chloride, adopting a cautious attitude and slowing down shipments ； Additionally, the situation regarding winter stockpiling in the popular Northeast market is not optimistic: firstly, purchases are spread out across different sources, and secondly, manufacturers are not very enthusiastic about taking delivery of goods. It is easy to see that an influx of supplies from outside the province would lead to low prices. Although demand is expected to increase at the end of September and in early October, the fragmented inventory levels and demand among ammonium chloride producers make it difficult for prices to rise. Overall, urea is expected to see a slight increase in the short term but a downward trend in the long run; its supporting effect on ammonium chloride is limited. Ammonium chloride itself faces an oversupply, with inventory that needs to be cleared, while demand remains weak, resulting in ongoing pressure to sell. It is anticipated that the market for ammonium chloride will remain weak in the short term, with prices likely to stay at low levels. (Tan Junying)