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Urea is hard to see price increases, let alone decreases Author/Source: China Fertilizer Network Date: 2020-10-19 Clicks: 3 With the announcement of tender quantities in India, the factors that could lead to price increases for urea in China have become apparent. According to monitoring by China Fertilizer Network, only a few urea manufacturers raised their prices this weekend. Currently, the standard ex-factory price for urea in Shandong is 1640–1680 yuan per ton; in Linyi, compound fertilizer manufacturers are offering a purchase price of 1690–1700 yuan per ton for urea. In Hebei, the standard ex-factory price is 1670–1720 yuan per ton, while in Henan it is 1670 yuan per ton, with transaction prices ranging from 1610–1640 yuan per ton. In Shanxi, the standard ex-factory price for urea is 1600 yuan per ton, and 1640 yuan per ton for large-grained urea. Although the prices of phosphate ammonium and potassium fertilizers have remained high recently, the upward trend in urea prices has been uneven. After National Day, despite various positive factors, urea prices failed to rise significantly; the maximum increase was only around 30-40 yuan. In some cases, the prices at certain urea manufacturers even declined. Overall, while it is difficult for urea prices to rise, it is even harder for them to fall. The main reasons for this are as follows: First, there is still demand for urea, but transportation is hindered. According to international reports, India’s total order volume this time is 2.094 million tons, exceeding the previous estimates of 1.5–1.8 million tons. Based on this figure, it can be said that the global trade volume of urea in early November will be largely determined by these orders. India’s own order volume is likely to be significant as well; therefore, there are signs that domestic urea stock levels will increase substantially. However, this year is special – due to the impact of the pandemic, many ports in northern India have faced major difficulties with loading and unloading operations. Some ports are still subject to capacity restrictions. Although a certain amount of urea is being transported by road, cost issues pose challenges, and with many regions entering the harvest season, the number of trucks transporting grain has also increased. It is not clear when these port restrictions will be lifted, and there is still a possibility of such restrictions continuing in the future. As a result, companies’ inventory levels cannot be reduced, and despite these positive factors, urea prices struggle to rise. Nevertheless, because of these positive elements, it is difficult for urea prices to fall. Secondly, companies are reducing production, but there are also facilities being brought back online. Starting from September 30, Jincheng in Shanxi Province announced the specific dates by which enterprises would have to reduce their production. According to estimates, by March 31 next year, production of urea in the Jincheng area could be reduced by up to 1 million tons as a result of these environmental regulations, which would help ease supply pressures in the market. However, some domestic factories have begun to resume operations this year, and some urea producers have also added new production facilities. Additionally, some gas-based manufacturers do not have any plans for maintenance this year, so overall supply pressures in the market are expected to be higher than they were during the same period last year. At present, the urea market is in a state of waiting to see demand trends. Although inventory levels in regions such as the Northeast are relatively low, there was already some purchasing activity when India won four consecutive tenders. Taking all these factors into account, it is unlikely that urea prices will see a significant increase in the short term due to demand constraints. In summary, the urea market has remained stagnant recently, with negative factors still present; however, there are also some positive aspects. It is expected that the overall price of urea will only rise slightly in the near term, and no significant increase is likely until the next bidding cycle begins or port loading restrictions are lifted. (Wu Wenchao)