Thread Content
Restrictions on urea production and shipments, along with price changes, pose challenges in both positive and negative terms. Author/Source: China Fertilizer Network Date: 2020-10-16 Clicks: 8 After the restrictions at ports, some traders have slowed down their purchases of urea, increasing the pressure on factories to sell their products. Even though the marked prices are attractive, there is little enthusiasm for speculation. If China does not have an advantage in terms of the volume of urea available for sale in the future, then such hopes will be unfulfilled； Meanwhile, as environmental and safety inspections are carried out in various regions, partial production restrictions have also been implemented; for example, the supply of urea in places such as Shanxi, Shandong, and Henan has decreased to some extent. This undoubtedly provides positive support for urea prices. However, when production restrictions coincide with other constraints, it becomes difficult to determine whether urea prices will rise or fall, and the future trend of urea prices remains uncertain. Currently, the overall domestic urea market is stable with only slight fluctuations in certain areas; prices remain firm in many regions, with minor increases or decreases in some places. Of course, this also applies to some large agrochemical suppliers and local distributors, and the actual transaction volume is not satisfactory. Affected by production restrictions in the Jincheng area of Shanxi, urea manufacturers are operating at reduced capacity. The prevailing ex-plant price for urea in this region is around 1,580 yuan per ton, with limited supply available. A few urea manufacturers in Inner Mongolia have sufficient orders to fulfill, and they also benefit from export opportunities; however, due to constraints in port handling, some of these companies offer relatively lower prices. According to traders, the typical ex-plant price for urea in this area is around 1,420–1,450 yuan per ton, while some high-quality products are sold at 1,540 yuan per ton. So, it seems that the urea market is currently in a difficult situation, facing fluctuations and uncertainty. As for its future trend, it will still be influenced by both supply and demand factors. Firstly, urea manufacturers can adjust their production levels flexibly, and factors that are beneficial or detrimental often remain uncertain. Due to the requirement for localized production cuts, the operation level of urea plants has decreased. Meanwhile, the market for liquid ammonia remains favorable in many areas, with some prices continuing to rise slowly. A few companies have shifted part of their production focus to liquid ammonia, or plan to do so in the future; this has reduced the urea production of these companies to some extent. According to statistics from China Fertilizer Network, the overall operational rate of urea production plants as of now is around 53.81%, with a daily production volume of approximately 151,000 tons. Given the high prices of liquid ammonia and the ongoing upward trend in its prices in certain regions, it is possible that more companies may shift to producing liquid ammonia in the future ； However, although the above are positive factors, as the end of the year approaches, the commissioning of new urea production capacity mentioned earlier is also set to take place in places such as Hubei and Jiangxi. This must be taken into account when predicting future trends in urea prices, as urea production levels are likely to fluctuate. Secondly, domestic demand in agriculture and industry varies. It is currently the off-season for agricultural fertilizers, and end-users are waiting before making purchases; in many areas there is supply but no demand. For example, the supply of urea in various regions in East China is limited, while in the Guangdong and Guangxi regions, urea prices have risen slightly but sales have slowed down ； Additionally, this year, due to rainy weather, yields of grains and vegetables have been poor, which has reduced farmers’ enthusiasm for planting. In some areas, the amount of fertilizer used has decreased, and the timing of fertilizer application has been postponed ； Large traders are cautious about taking delivery of goods, and in order to avoid price reversals caused by excessive inventory, they also keep the volume of goods distributed to their local outlets within controlled levels, which results in urea producers lacking large-scale orders to support their operations. The overall production level of industrial compound fertilizer manufacturers remains low. However, following the postponement of the phosphorus compound fertilizer conference, prices and policies related to winter stockpiling for these manufacturers will be introduced one after another, which may generate some demand for urea ； Furthermore, the operation of plywood factories is progressing well, resulting in a satisfactory pace of urea procurement. According to recent reports, Indian RCF has announced the bidding prices for urea imports as of October 9th. The lowest bid price on the west coast is 279.94 dollars per ton, while on the east coast it is 279.25 dollars per ton. In some markets in China, such as those in Shandong and Hebei provinces, the reference price for urea at the factory level is around 1620–1660 yuan per ton. Considering current market prices, these Indian bidding prices can be considered a slight support at best, or they have little impact overall ； Furthermore, we must also take into account the situation of capacity restrictions at our country’s ports, which could pose obstacles to the supply of urea. Overall, the supply and demand balance in China’s urea market remains uneven. Under the pressure of high production levels, domestic demand is weak, and international exports face additional obstacles. It is still unclear how many orders for urea will be placed in China, and in the short term, there are no significant positive factors to support the urea market. It is expected that prices will remain stable, with only slight fluctuations. (Tan Junying)