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99% of people are optimistic about diammonium fertilizers; the remaining 1% can be reserved for compound fertilizers. Author/Source: China Fertilizer Network. Date: October 19, 2020. Clicks: 3. In the blink of an eye, we are in the middle to late part of October, and the autumn fertilizer market has come to a stable end. With only a few areas still having minor demand for replenishments due to weather conditions, the focus of the market has shifted from wheat fertilizers to the winter storage of compound fertilizers. The unexpected postponement of the phosphate compound fertilizer conference has indeed disrupted the dynamics of the winter storage market. The compound fertilizer companies, which had planned to announce prices and policies related to winter storage during the conference, were forced to adjust their plans. As of now, the overall situation regarding winter storage remains unclear. Given that the seasonal period is approaching in some areas, the start of the winter storage rush might occur by the end of this month. The winter storage market covers a wide range of areas, with demand existing in most regions. Urea, diammonium phosphate, and compound fertilizers are the key products in this market. To some extent, diammonium phosphate and compound fertilizers can serve as substitutes for each other; however, the actual situation is different. In the autumn, the diammonium phosphate market saw steady price increases, with continuous export orders, and prices were even higher than those in the domestic market. Most diammonium phosphate manufacturers have export orders that will last until November, which has led to a shortage of supply for these products domestically. The pre-order price for 64% diammonium phosphate delivered to a factory in the southwest from Heilongjiang has risen to 2,750 yuan per ton, and the previous buy-out policy has been abolished. Although downstream buyers are cautious, diammonium phosphate manufacturers are likely to continue to maintain high prices in the future. While many people are optimistic about the future prospects for diammonium fertilizers, the market situation for compound fertilizers is rather disappointing. There are indeed reasons for price increases in the current market, but companies lack the courage to raise prices, fearing that such increases might affect future cash inflows. At present, most companies are still waiting to see how the market develops and are preparing for winter stockpiling. Below is a brief overview by the editor: Reasons supporting price increases: First, rising costs of raw materials. Following the sharp rise in the price of potassium chloride, the prices of urea and monoammonium compounds also changed accordingly. The increase in urea prices was somewhat surprising; after India issued its tender for urea, the domestic urea market became active. As the tender prices and the quantities offered in bids were gradually announced, suppliers gained greater confidence. The prices set in this Indian tender were in line with expectations, and if they are attractive enough to suppliers, then the volume of urea exported from China could be substantial, thereby reducing the demand pressure in the domestic market and helping to stabilize prices. The peak season for high-phosphorus fertilizers in autumn has passed. However, due to the favorable market conditions for raw materials such as sulfur and liquid ammonia, there is an upcoming demand for raw materials for winter storage of compound fertilizers. Ammonium phosphate manufacturers also have a stronger tendency to keep prices high. Since price increases during autumn did not succeed, it is quite possible that they will take advantage of the final opportunity for winter storage to make appropriate adjustments ； Second, the market for competing diammonium products is booming. As mentioned above, the price of diammonium phosphate for winter storage is relatively high, and the price difference between it and that of compound fertilizers has been quite large recently. Downstream distributors may not understand why the price of diammonium phosphate is rising; as a result, their preference might shift toward compound fertilizers. With increased demand, compound fertilizer manufacturers will certainly not stay idle, so price increases are a logical consequence. Lack of the courage to raise prices: First, demand is insufficient during the winter period. Unlike the northern regions, many areas in the south experience two or three growing seasons per year. The so-called winter stockpiling is not solely intended to prepare for next spring; there is still some demand during winter, though it is limited. After the autumn market closes, until the Lunar New Year, demand for compound fertilizers remains low in certain areas. Dealers already have little willingness to purchase such fertilizers, and coupled with this low demand, a wait-and-see attitude prevails ； Secondly, the overall supply is relatively high. Although the demand for compound fertilizers in the winter storage market is indeed substantial, the market remains in a state of supply exceeding demand. It is reported that new fertilizer production facilities in the Northeast region will have an annual capacity of over one million tons, resulting in a continuous influx of supply, which is also the main reason behind the relatively low prices during the early stages of winter storage. Even if raw material prices rise significantly in the future, the oversupply situation will prevent increases in the prices of compound fertilizers; any price increase will lead to a reduction in production volume, forcing companies to be cautious in their market strategies ； Third, the market tone has been largely determined; following the low prices seen earlier on, dealers have stocked up to some extent, with some even indicating that there won’t be a significant shortage in the future, and thus they have little intention of making further purchases before the New Year. In summary, whether prices rise or not, the winter storage market for compound fertilizers will face difficulties; it is hoped that the improving market conditions for diammonium fertilizers will help to boost the compound fertilizer market to some extent. (Feng Hongyang)