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Urea prices are rising sharply; ammonium chloride prices will see further changes. Author/Source: China Fertilizer Network Date: 2020-10-26 Clicks: 17 Recently, driven by factors such as rising import prices, increased demand for purchases, and soaring prices of natural gas as a raw material, urea prices have continued to rise wave after wave. In many regions, prices have even increased repeatedly, with some increases reaching 100 yuan per ton. For example, the current average ex-factory price of urea in Hebei is around 1710–1750 yuan per ton, with prices subject to negotiation. In Shanxi, due to production restrictions, the supply of small-grained urea is limited, and the average ex-factory price is around 1620 yuan per ton. The highest price increases have been seen in parts of the southwest; for instance, one factory’s price has risen to 1680 yuan per ton. Currently, it is the off-season in the agricultural market, so overall demand is limited; large traders remain cautious about purchasing urea. However, as the operating rates of industrial compound fertilizer manufacturers start to rise, there is an increase in the procurement of raw materials. The overall operating condition of plywood factories is satisfactory, and this does not hinder the rise in urea prices. The industry is cautiously optimistic, believing that there is still some room for price increases, thanks to factors such as demand and available raw materials. The overall market situation is quite favorable. At the same time, ammonium chloride has also attracted considerable attention in relation to urea. The market for ammonium chloride is showing some improvement: firstly, prices remain relatively stable, with only slight increases of 10 yuan per ton in certain regions; Secondly, there is a slight increase in inquiries from downstream customers. So, given the upward trend in urea prices, how many more steps will it take before ammonium chloride prices rise as well? The ammonium chloride market remains relatively stable, and the pessimistic attitude among industry players has improved to some extent. Production facilities are operating at high levels, but the cautious attitude in the downstream market has led to slow orders, as people believe that the price of ammonium chloride has not yet reached their expected levels, resulting in low enthusiasm for purchases. This puts pressure on the inventory levels of production companies. However, in certain areas, supported by costs and demand, there are reasons for the price of ammonium chloride to remain steady; even if a price increase does not occur right away, at least the market situation is likely to improve. Still, it is necessary to keep an eye on changes in supply and demand. Firstly, the operating rate of caustic soda manufacturers is high at 70%, and it shows an upward trend. Firstly, since the second half of the year, the price of soda ash has risen significantly and at a rapid pace. Downstream demand has gradually reached saturation, and coupled with resistance to high prices, the volume of new orders has decreased. In some areas, the market for soda ash has shown weakness, leading to a decline in prices. However, since soda ash is the main product, chemical companies that produce both soda ash and ammonium chloride continue to focus on soda ash production, so their operations will remain at a high level. At the same time, the price of ammonium chloride is already low; considering costs, these companies will maintain relatively stable prices for ammonium chloride, which provides some positive support ； Secondly, a few large ammonium chloride manufacturers in Jiangsu, Hubei, and Sichuan are currently operating at below full capacity, but they are gradually resuming operations and increasing production; it is expected that output and supply will increase by the end of this month or early next month. Secondly, the progress in following up on requests is slow. At present, the overall operational rate of the compound fertilizer industry is relatively low, at around 44.35% only. The prices of various raw materials have risen, yet the implementation of winter storage policies has been problematic; furthermore, sales conditions are not favorable. As a result, some compound fertilizer manufacturers lack enthusiasm for production, especially small and medium-sized enterprises in this sector ； Currently, large traders tend to purchase as needed; small and medium-sized traders have a relatively pessimistic outlook on ammonium chloride and adopt a cautious attitude, resulting in slow procurement progress ； The operating capacity of some ammonium chloride granulation enterprises is relatively low, resulting in limited purchases of raw ammonium chloride. Again, although there are many negative factors in the ammonium chloride market, there are still positive factors providing support or expectations. Firstly, there is the support provided by the rising price of urea; for some compound fertilizer manufacturers facing high cost pressures, they opt to use cheap ammonium chloride as a substitute for urea as a raw material ； Secondly, in terms of raw materials, it is necessary to address the issue of the supply and price of natural gas in the southwestern market; this will lead to increased costs for some ammonium chloride manufacturers that rely on such gas ； Third is the expectation regarding the winter storage market in the Northeast. Currently, the supply of ammonium chloride in this region is limited; as the winter storage market begins to operate, there is an increase in shipments, which should help alleviate the supply pressure in other markets to some extent. Overall, with the support of urea and the boost from improved local demand, there is some potential for a slight increase in local ammonium chloride prices in the short term. However, due to the off-season nature of domestic market demand, low operating levels on the downstream side, and cautious waiting attitudes among traders, it is expected that the overall market trend will remain stable, with only minor fluctuations in certain areas. (Tan Junying)