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Urea prices are soaring wildly; it’s now in the second half of this trend. Author/Source: China Fertilizer Network Date: 11-06-2020 Clicks: 25. The off-season is not slow in terms of price changes – this is the most common observation among manufacturers these days. Since the urea market has been gaining momentum, prices have shown a continuous upward trend. Although some downstream users are reluctant to purchase urea at high prices, in certain areas where production levels are low, urea prices have continued to rise modestly. In the Linyi region, fertilizer manufacturers have reduced their willingness to purchase urea, and the purchase price has dropped to around 1800–1810 yuan per ton. It is necessary to be vigilant regarding the signals indicated by the slowdown in transactions of urea at high prices. Natural gas prices in the southwest region have risen, increasing the costs for companies that use gas in the production of urea. The supply of urea in the domestic market is at low levels, while industrial demand remains strong. There are also export orders, as well as pricing guidelines that may be released later in the month. Urea prices have risen sharply recently; in some areas, the increase has reached around 100–200 yuan per ton, exceeding expectations in many places. However, since it is off-season in the agricultural sector, industries are reluctant to purchase urea at high prices. It seems that the upward trend in urea prices has entered its second phase or is coming to an end. In the Shanxi market, which has traditionally been considered a region with low prices, urea manufacturers operate at a lower capacity level and there is limited supply of goods; as a result, the average ex-plant price of urea there has risen to around 1730–1740 yuan per ton. In the Inner Mongolia region, the average ex-plant price of urea is around 1610–1650 yuan per ton, with some high-quality products reaching a price of 1710 yuan per ton ； Of course, in the grassroots markets as well, there are situations where goods are available but there is no market for them; for example, the wholesale price of urea in certain areas of Jiangsu is around 1,850–1,860 yuan per ton, and the future trend in these prices is closely watched. Firstly, the operating rate of urea manufacturers is low, resulting in a tight supply of goods in the market. At present, production restrictions remain in the Jincheng area of Shanxi. In many regions, urea manufacturers face limitations on their operational capacity due to environmental and safety inspections. Additionally, rising natural gas prices in the southwest region have led some companies to reduce their production levels as a way to mitigate risks. According to statistics from China Fertilizer Network, the overall operational rate of urea manufacturers as of now is 54.06%, with a daily production volume of around 151,800 tons; supply is slightly tight in certain areas ； Additionally, the market for liquid ammonia in China is continuing to heat up, with prices at high levels and still on the rise. Whether focusing on urea or liquid ammonia, companies have significant advantages in production; therefore, supported by the high prices of liquid ammonia, urea will remain well-positioned in the short term. Secondly, there is a slack season in agricultural demand, and although industrial demand is decent, there is resistance to high prices of urea. The agricultural market is in its off-season; aside from slight demand in certain areas and the appropriate amount of winter fertilizers stored in regions such as the Northeast, demand in the main markets for agricultural use has essentially ceased, leaving no demand to support the flow of urea. However, current industrial demand is fairly good. Firstly, thanks to the rising prices of various raw material fertilizers and the need for winter storage of fertilizers, production in the industry as a whole is gradually increasing, leading to an upward trend in the purchase volume of urea compared to earlier periods ； Secondly, there has been a certain recovery in the operation of plywood factories, resulting in considerable demand for urea as well. Additionally, the export market is one of the factors driving price increases in the domestic urea market. The reason for this is that, according to market reports, India may issue new tenders again in the middle or late part of the month, or at the end of the month; this could serve as a factor that leads to further price increases in domestic urea. However, the actual situation will depend on subsequent developments as well as real-time conditions such as those related to loading and unloading at ports. Once again, urea prices are high while ammonium chloride prices are low, and the impact on urea is becoming increasingly evident. Looking at the trends and prices of various nitrogen, phosphorus, and potassium-based fertilizers, all of them are on the rise, with significant increases; in some cases, it is even difficult to find these raw materials in stock. Only ammonium chloride shows a milder increase in price, with a smaller rise in value. The large price difference compared to urea has led some compound fertilizer manufacturers to use ammonium chloride as a substitute for urea due to cost pressures, which in turn affects the demand for urea. Overall, rising natural gas prices and other factors such as tender announcements act as supportive elements for urea manufacturers. However, due to the off-season in agriculture, urea prices remain higher than expected; there is also growing resistance from the industrial sector. Additionally, ammonium chloride has a significant impact on urea prices. It is expected that urea prices will continue to be supported by favorable conditions in the short term, with stable prices or slight increases possible in some areas. But in the long run, demand is expected to decline, and the market may enter a phase of weakening. (Tan Junying)