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Compared to diammonium fertilizers, the price of compound fertilizers is still too low! Author/Source: China Fertilizer Network Date: 2020-11-09 Clicks: 8 The fertilizer market has been quite active recently; after the calmness of the autumn period, the winter storage market has become a topic of discussion, and the fertilizer market, which had been under pressure for a long time, has finally found an opportunity to turn things around. The demand for most fertilizers is high, with prices continuing to rise. Markets that were not considered promising during the off-season are now showing signs of improvement, and the outlook for the future is generally optimistic. Although the market conditions for fertilizers are generally positive, there seems to be some variability. Take compound fertilizers, which play a key role in the winter storage market, as an example: their current performance is not particularly impressive, and in some cases it’s even rather poor. As of now, according to Zhongfei Net, the main ex-plant prices for 45% chloro/sulfur-based balanced fertilizers across the country are 1,780–1,850 yuan per ton and 2,000–2,150 yuan per ton, respectively – both figures being 100 yuan per ton lower than those in the same period last year. Since spring, the price level of compound fertilizers has remained low; even as prices of other types of fertilizers have risen significantly, the increase in the prices of compound fertilizers has been modest. Taking the alternative, diammonium phosphate, as an example, there is a significant difference between the two. According to data from the Same Fertilizer Network, as of this weekend, the purchase price for 64% diammonium phosphate at a factory in the southwest region, delivered to Heilongjiang, was 2750–2800 yuan per ton, with further increases likely in the future. The price of diammonium nitrate has been soaring, driven primarily by favorable conditions in the export market. For a long time, both in terms of volume and price, exports have been more attractive than the domestic market, resulting in a large number of export orders pending processing at diammonium nitrate factories, and this situation has persisted for an extended period; as a consequence, prices in the domestic market have also risen. Although the price of compound fertilizers has seen some recovery recently, it remains lower compared to diammonium fertilizers. As for the market ahead, most experts are optimistic but also cautious. First, the potential for increases in raw material costs. Indeed, the cost of compound fertilizers at this stage is significantly higher than it was earlier, due to rising prices of raw materials. However, so far it seems that the prices of most raw materials have reached their peak, or there is little room for further increases. After the price announcements, urea prices rose sharply. Coupled with production restrictions in certain areas of the country and rising natural gas prices, market confidence increased significantly. Starting last week, the urea market began to calm down. Due to limited demand from domestic industries and agriculture, there may be short-term price declines in certain regions after the impact of those price announcements subsides. If the price of urea drops, it will have a negative impact on high-nitrogen compound fertilizers, and an increase in their prices in the future may not be easy to achieve. Secondly, the demand gap before the festival. The main reason why the price of compound fertilizers has remained moderate is weak demand, as well as a low level of enthusiasm among end-users for winter stockpiling, which prevents large-scale stock accumulation. One reason for this is that the winter stockpiling process started too early in some areas, and prices were extremely low; as early as September, some compound fertilizer manufacturers in the Northeast region began accepting prepayments for winter stockpiling, offering prices so low that they motivated distributors to make payments. As a result, many distributors now have a certain amount of inventory ready for winter use ； The second reason is that while there are short-term positives in the compound fertilizer market, long-term confidence is lacking. Most of the compound fertilizers stored for winter use will be sold next spring, and any problems that arise could have severe consequences. Therefore, it is unlikely that dealers who already have stock will purchase more at high prices ahead of the Spring Festival. Finally, the range of price fluctuations. The rise in the price of compound fertilizers is a fact, but the extent of this increase needs to be carefully considered. The winter storage prices for some compound fertilizer manufacturers have not yet been determined; the main reason is a lack of confidence in raising prices, as there is concern that this might affect the willingness of downstream distributors to make payments. Adopting a cautious approach and focusing on volume sales is the strategy that companies are pursuing at present. The prices of raw materials have all risen by more than 100%, yet the potential for an increase in the price of compound fertilizers remains in the range of 30–50 yuan per ton. Assuming that there is still a potential increase of 50 yuan per ton for compound fertilizers in the future, their prices still do not seem to have reached the levels seen during the same period last year. Therefore, price fluctuations in compound fertilizers during the winter storage period may not be as significant as expected. In summary, rising prices of compound fertilizers help to accelerate the process of winter storage, but they also increase the risks associated with such storage for distributors. Winter storage involves taking risks based on forecasts; therefore, it is necessary to think carefully before making any purchases, always considering one’s own capabilities and resources. (Feng Hongyang)