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Urea prices rise more than they fall; winter fertilizer stockpiling faces a major challenge. Author/Source: China Fertilizer Network. Date: November 16, 2020. Clicks: 9. Recently, urea prices have continued to rise: in Shandong province, the standard ex-factory price of urea has now reached 1,800–1,810 yuan per ton. In Linyi, compound fertilizer manufacturers are receiving urea at around 1,840 yuan per ton. In Hebei province, prices have also risen, with the standard ex-factory price at 1,810–1,820 yuan per ton, while actual transactions are taking place at around 1,800 yuan per ton. In Shanxi province, the standard ex-factory price for small-grained urea remains at 1,700–1,710 yuan per ton, but prices for urea shipped by road have risen to around 1,750 yuan per ton. Looking at urea prices over the past few months, there has been an overall upward trend with few declines. However, this year’s production volume during the same period is higher than in previous years, so oversupply remains the dominant issue. The turning point in urea prices usually occurs in November, but that hasn’t happened yet this year. Although some traders are still waiting to see what will happen, their attitude has changed significantly compared to previous years. The main reasons why this year is different from previous years are as follows: First, rising grain prices provide potential purchasing power. It is reported that this year, due to various factors, the prices of most field crops are higher than in the same periods over the past few years. The rise in grain prices has driven up prices in the agricultural supplies market, and farmers are also more inclined to make purchases. As a result, some local distributors have started ordering goods earlier; it is said that some distributors in Heilongjiang began making purchases in early October. Additionally, the continuous increase in fertilizer prices has further strengthened these traders’ confidence in holding onto their stock. Even if they do not make further purchases, the likelihood of selling at low prices is reduced. There is relatively little supply of fertilizers at extremely low prices in the market, and the tendency to hold back sales contributes to high fertilizer prices. Secondly, India’s consecutive centralized tenders have slightly alleviated supply pressures. This year, due to the impact of the pandemic, fertilizer production in India has been relatively poor. Coupled with the severe global pandemic situation, tenders for urea in India have featured large volumes and concentrated bidding. For China, which is relatively safe, its products can meet the demands of the Indian market in terms of both quality and quantity. Meanwhile, the supply of international urea is relatively tight, resulting in a seller’s market for urea this year. Looking at the export prices over the past few periods, although they do not reach the high levels seen domestically during the same period, there has been a significant improvement compared to the previous situations where prices were often lower than costs. This has increased companies’ enthusiasm for exporting, thereby helping to alleviate domestic supply pressures and stabilize prices. Finally, changes in the low inventory situation will advance some of the demand. This year, the commercial seasonal storage of fertilizers has been initially launched. Market rumors suggest that from September 1, 2020, to April 1, 2021, the companies responsible for storage will choose their own dates to carry out continuous storage for 6 months. Moreover, the oversight related to this commercial seasonal storage is expected to be stricter than in previous years. Based on the timeline, most of these storage companies will need to make purchases by the end of this month; some of the demand has already been met in advance. Additionally, due to the recent industrial demand for urea and the rising prices of liquid ammonia, there is an increasing tendency to sell urea more actively. In summary, urea prices continue to rise due to the aforementioned factors. However, since the market supply of urea this year is expected to be higher than it was during the same period last year, coupled with sales following the inventory checks, the situation of oversupply will continue to worsen. India may launch further tenders in the near future, and there is a possibility that prices could keep rising; nevertheless, caution is still necessary when it comes to increases in urea prices. (Wu Wenchao)