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When printing marks hit production limits, how do urea fluctuations behave? Author/Source: China Fertilizer Network Date: 2020-10-10 Clicks: 29 After the National Day holiday, the domestic urea market has seen two positive developments. First, India received a total of 16 bids, with a combined bidding volume of 3.76 million tons – 1.895 million tons from the western coast and 1.496 million tons from the eastern coast. The lowest bid price is likely to be $278 per ton at the port of arrival, which is equivalent to around 1,750 yuan per ton at Yantai Port (prices are per ton; same below). Subtracting the shipping costs incurred by the manufacturers gives the factory price, with the exact amount likely to be announced next week ； India’s finance ministry has approved a budget for the purchase of 1.5 million tons of urea ； India may plan to purchase 3.8–3.9 million tons of urea by the end of the year, with China potentially supplying 600,000–1 million tons ； Secondly, on September 30, the Ministry of Ecology and Environment issued the \"Notice on Clarifying Differential Emergency Control Measures for Key Industry Enterprises during the Autumn and Winter Periods of 2020–2021.\" This notice stipulates that urea-producing enterprises in the area around Jincheng, Shanxi Province, shall adopt a regional coordination approach during the autumn and winter years 2020–2021, with alternating periods of production suspension to reduce emissions and implementation of differential control measures. Driven by these two positive factors, even though domestic market demand remained relatively modest after the National Day holiday, urea prices in some key regions saw a slight increase. At present, the average ex-factory price of urea in Shandong is 1630–1660 yuan per ton (the same unit applies elsewhere). In Linyi, compound fertilizer manufacturers are purchasing urea at 1680–1690 yuan per ton, while in Hebei the average ex-factory price is 1670–1720 yuan per ton. In Henan, the average ex-factory price is 1640 yuan per ton, and in Shanxi it is 1570 yuan per ton; for large-grained urea, the price is 1630–1640 yuan per ton. Some industry experts suggest that due to these factors, urea prices are showing signs of rising in the near term. However, without further positive developments, the increase in urea prices is likely to be limited. The main reasons for this are as follows: first, regarding ports. Although India has issued tenders frequently this year, and the four tenders held earlier also contributed to a continuous rise in domestic urea prices, the port handling capacity has not performed as well as expected due to the impact of the pandemic. Even though international reports indicate that India will still purchase nearly 4 million tons of urea this year, given the current port handling capacity and the global pandemic situation, the amount of urea that China can export to the Indian market by the end of the year is likely to be limited. If exports are hindered and ports have capacity restrictions, urea will still need to meet demand in the domestic market, which will dilute the positive effects. As usual, after October, the urea export market enters a slow period, and the international market alone cannot play a decisive role. Secondly, the reduction this autumn and winter is relatively small. In the past two years, as environmental regulations governing production have become increasingly strict, coupled with limited supplies of natural gas, the daily production of urea during winter last year dropped to around 130,000 tons. Although the Shanxi region is once again under such environmental restrictions this year, the duration of these restrictions is about half a month shorter than last year, and there are no restrictions on natural gas supply at present; there have been no announcements of such restrictions in regions such as Southwest China, Xinjiang, and Ordos. Moreover, some enterprises plan to increase their production this year, so the supply volume in the winter market this year is likely to be higher than last year’s. Finally, a large amount of demand was not activated. Although some plywood factories resumed production after the National Day holiday, agricultural demand in autumn remained relatively low. Coupled with weaker purchasing activity from compound fertilizer manufacturers, winter stockpiling has not led to a significant increase in supplies, resulting in a situation where supply still exceeds demand in the market. Urine fertilizer producers remain in a somewhat disadvantaged position; due to inventory pressures, some companies say that the price increase this time is likely to be modest. In summary, tendering processes in India and domestic production restrictions have indeed had a positive impact on urea prices; it is expected that urea prices will rise in the near future. However, the extent of this increase is likely to be limited. It remains necessary to pay attention to the operational status of urea production facilities as well as the raw material procurement by compound fertilizer manufacturers. (Wu Wenchao)