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Surge in prices of urea with labeling requirements; many uncertainties surrounding winter storage _ Author/Source: China Fertilizer Network Date: 10-12-2020 Clicks: 7. After the National Day holiday, the autumn fertilizer market is coming to an end, and sowing activities for winter wheat are gradually starting from south to north, with progress in many areas already exceeding 50%. Entering October, there was a relatively strong demand for fertilizer replenishment for autumn wheat in certain areas; compound fertilizer manufacturers were able to ship their products smoothly, and the overall market situation remained stable. However, as the market entered its final stage, new orders for replenishment were placed more flexibly, and companies tended to reduce their production volumes in order to clear their inventory and prepare for winter storage. In the blink of an eye, the fertilizer market has entered the winter storage phase. Compared to previous years, this year’s winter storage market for compound fertilizers has been full of fluctuations; low prices were reported in the early stages. After many twists and turns, the winter storage prices in most regions have become uncertain at present, with payments generally being made on a interest-based basis, resulting in modest outcomes. In terms of the current market conditions for raw materials, it cannot be said to be favorable, but it certainly isn’t unfavorable either. Among these, nitrogen and potassium fertilizers are the most notable; following increases driven by large traders, the price of potassium chloride at ports has risen significantly compared to earlier levels, and it is likely to remain strong in the coming period as well ； The urea market is extremely active; with the impact of bidding processes, prices for urea both internationally and domestically are experiencing fluctuations. The latest bidding results have been released, showing a high total volume of bids and reasonably favorable bid prices. Even if the prices announced next week are lower than previously expected, the high demand will still help improve the supply-demand balance in the urea market. Additionally, there are rumors that India will still have a demand for over 200 million tons of urea by the end of the year. This round of price increases coincides with the start of the winter storage season, and favorable domestic urea prices will provide some support for the composite fertilizer market. Will there be a turnaround in the winter storage market? First, winter storage starts off stable. As is well known, the annual National Phosphorus Compound Fertilizer Conference will be held in Qingdao, Shandong, on the 18th of this month. The convening of this conference is generally seen as the official start of the winter storage market for compound fertilizers, after which various companies will successively announce their winter storage prices and policies. Recently, raw material prices have remained relatively strong, providing some support for the prices of compound fertilizers intended for winter storage. Whether it is the end of autumn or the beginning of winter storage, if raw material prices weaken, compound fertilizer prices will undoubtedly drop. Moreover, the baseline price level for winter storage this year is already relatively low; after the pricing is finalized, stable or rising urea prices will help ensure a smooth start to winter storage of compound fertilizers, otherwise the market could see a significant decline. Secondly, winter storage demand may improve. Apart from the price of compound fertilizers, downstream demand is crucial. The main reason for the weak atmosphere in the winter storage market is poor demand in recent years; dealers are becoming less enthusiastic about winter storage, which puts greater pressure on companies, leading to a price war on the horizon. This winter, the demand for grain storage might see an improvement. One reason for this is that food prices are generally high, which increases farmers’ incomes and boosts their enthusiasm for preparing for planting season ； The second reason is that although the risks associated with winter storage are high, the current price levels of compound fertilizers for winter storage are lower compared to last year, leaving very little room for further price reductions. Therefore, at the beginning of the winter storage period, as various companies introduce favorable prices and policies, distributors will stock up to varying degrees depending on their own needs. Finally, the market for winter storage may be rational. In fact, the winter storage market started early this year. Taking the Northeast region as an example, compound fertilizer manufacturers began collecting payments in August, and the prices offered were surprisingly low. Although this period of advance payment was short, it still had an impact on the market. Firstly, distributors were misled into thinking that low prices would prevail from the start, which means prices are even less promising in the future – this is the concern of most distributors at present. In the absence of any positive factors, price increases are likely to be met with resistance ； Secondly, compound fertilizer manufacturers are under pressure; after receiving payments at low prices in the early stage, raw material prices have risen compared to before. Continuing to offer low prices increases cost pressures, and raising prices rashly would damage the willingness of downstream customers to purchase products. Therefore, it is the right approach to handle the market in a rational manner. In summary, the bidding process for urea in India is indeed relatively favorable, but due to its uncertainties, it cannot be regarded as a solid factor supporting the winter storage market for compound fertilizers; a cautious and optimistic approach, waiting for the right opportunity, is necessary.