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Lower urea prices to attract buyers – a last resort Author/Source: China Fertilizer Network Date: 2020-09-25 Clicks: 4 The recent trend in urea prices is no longer one of steady increases; after being strong, prices have seen slight adjustments and are now experiencing modest declines, with the drop ranging from 10 to 30 yuan per ton； The reasons for the decline are nothing more than weakening demand, cautious waiting on the part of traders, and the approaching National Day holiday, which has led to a reduction in raw material purchases by some downstream manufacturers. Traders have become aware of the patterns inherent in the urea market, so they tend to wait and purchase only as needed. Meanwhile, urea manufacturers continue to operate at full capacity; therefore, a slight drop in urea prices is an inevitable outcome. Urea prices began to decline first in parts of East China, North China, and Central China. Currently, the typical ex-factory price of urea in Shandong is around 1700–1710 yuan per ton, while in Shanxi it is around 1565–1575 yuan per ton. In Henan, the typical ex-factory price is around 1620–1660 yuan per ton. Of course, discounts are available when making purchases ； As the National Day holiday approaches, industry attention is mainly focused on the progress of fertilizer preparation at the downstream level, the improvement in port loading restrictions, and the timing of tenders in India. Urea plant operations are at high levels, and they are set to increase further before the National Day holiday. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises is around 56.92%, with a daily production volume of approximately 159,800 tons; this represents a high level of operation that has been maintained since the beginning of the month ； Additionally, a large urea production plant in Shandong that was under maintenance is set to resume operations over the weekend; an urea factory in Inner Mongolia that was also under maintenance is restarting its operations as well. A urea production facility in the Northeast that was under maintenance is expected to resume operations next week ； In the long term, it is also necessary to take into account the increase in new production capacity; for example, a urea plant in Jiangxi may start operating by the end of the year, which will have a negative impact on the overall trend for urea ； In addition, there is liquid ammonia, which is closely related to this issue. Currently, the price of liquid ammonia is high. Considering the restrictions on vehicles carrying hazardous materials during the National Day holiday, and the fact that most ammonia-using enterprises have sufficient stockpiles of liquid ammonia, the market outlook for liquid ammonia is negative, with an upward trend in inventory levels. As a result, it is possible that some enterprises may shift their production focus slightly toward urea in order to reduce shipping pressures in the short term. The demand for urea in industry and agriculture is weak, which is not a positive factor. First of all, aside from the fact that demand for nitrogen fertilizers in the autumn market is not high, the current fragmented demands in agriculture also result in a lack of support for such fertilizers ； Secondly, with the National Day holiday approaching, urea manufacturers may aim to collect more payment by placing orders, and thus start to reduce prices to attract customers ； Once again, large agrochemical suppliers allow customers to purchase as needed, adopting a cautious approach to stock allocation. Especially during the traditional off-season that begins in mid-October, traders remain even more cautious and opt for strategies that involve buying at high prices and selling at higher prices ； Moreover, the operating capacity of compound fertilizer manufacturers is currently low; in particular, most small and medium-sized compound fertilizer companies are operating at reduced levels or have ceased production, while larger mainstream compound fertilizer manufacturers are operating at normal levels, with raw material purchases being carried out as needed ； In the end, the operation of the plywood factory was average, and the procurement of raw material urea was done carelessly. However, there are still positive factors to look forward to in the urea market. First is the expectation regarding export conditions; since the issue of capacity restrictions at ports has not been fully resolved, urea exports and its collection at ports remain hindered, with people waiting for these restrictions to be lifted in the future ； Second is the expectation regarding India’s new round of tenders; whether India issues tenders before or after November, there will likely be slight price increases or upward moves in the market at that time ； Thirdly, it is also necessary to consider the impact of environmental or safety inspections on the operation of urea production plants, which may result in some of these plants reducing or stopping their production. Overall, in the short term, negative factors dominate the market, with the initiative lying with the buyers; therefore, urea manufacturers are forced to reduce prices slightly in order to attract orders and alleviate the pressure resulting from high operating levels. In the long run, there are opportunities for improvement thanks to factors such as exports and port logistics. (Tan Junying)