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A difference of 100 – Is there still optimism for compound fertilizers? Author/Source: China Fertilizer Network Date: 2020-11-18 Clicks: 4 In mid-November, the market for winter storage of fertilizers entered a period of intense activity. With significant increases in the prices of most raw materials used in fertilizer production, the cost of compound fertilizers rose markedly, leading to corresponding price increases on the part of companies. Considering the mindset of downstream buyers who were preparing to stock up, many companies had to be cautious when setting prices and policies for winter storage; some even did not have fixed prices and only accepted deposits at interest. However, the prices specified for winter storage now are all higher than those in October. Although the prices of winter-stored compound fertilizers have risen, they have not yet reached the levels seen during the same period last year. Taking 45% chloro/sulfur-based compounds as an example, the mainstream factory prices during the same period last year were 1950–2100 yuan and 2050–2200 yuan per ton, respectively – about 100 yuan per ton higher than current prices. As a result, many in the market believe that compound fertilizer prices are likely to continue rising in the short term, and even if raw material prices weaken in the future, it will be difficult for compound fertilizer prices to drop back to their previous low levels. Firstly, cost support remains. Apart from urea, the prices of phosphatic and potassic fertilizers will remain high in the short term. Urea prices are volatile; the current factors contributing to upward pressure on these prices include the purchasing demands from domestic compound fertilizer manufacturers as well as tender processes for urea purchases in India. Following the previous round of tenders in India, domestic urea prices managed to reach high levels. Although end-users resist high prices, urea has already been fluctuating at these high levels for some time now ； Ammonium sulfate remains in short supply with rising prices; due to a shortage of spot supplies, the price of 55% powdered ammonium sulfate at factories in Hubei province has already exceeded 2,000 yuan. With sufficient stock available for shipment, prices are likely to rise further ； The export market for diammonium is favorable, while domestic prices remain high; some manufacturers focus on supplying the export market, resulting in a temporary shortage of supply in the domestic market. Secondly, there is still remaining demand. The reason for the considerable buzz in the winter storage market for compound fertilizers this year is largely due to the impact of low-priced supplies available earlier on. In order to capture market share, various companies rushed to offer low prices. As is well known, such prices are attractive enough to encourage customers to make purchases. In other words, there are quite a number of distributors who currently have access to low-priced supplies. However, the remaining demand potential cannot be ignored either. One reason for this is that the timing of winter storage activities varies between the northern and southern regions; the Central Plains region is still in its initial stage of hesitation, with winter storage starting slowly after the end of the autumn market ； The second reason is the high prices of grain, which has led to a greater reluctance on the part of retailers to sell their goods; as a result, distributors face difficulties in recovering their funds, and thus lack the capital needed for winter storage of fertilizers. In such circumstances, they can only adopt a wait-and-see approach regarding winter storage. Finally, anticipation remains. Recently, the prices of compound fertilizers have been on the rise overall. Although downstream users are not very receptive to these increases, the main suppliers have raised their prices to some extent. The primary reason for this is the sharp increase in the cost of raw materials, which has increased production costs. At present, however, some companies do not yet have clear pricing or payment policies; in fact, some have even stopped accepting payments. It is a critical period for the winter storage market, yet companies are restricting new orders. The reason is that there were many orders received in advance, and those orders came at low prices; currently, these companies are focusing on serving such clients, and with rising raw material costs, new orders are already scarce ； The second reason is that the low-cost raw materials have been exhausted, while high-cost raw materials are in short supply, resulting in high procurement risks; it is better to wait until market conditions stabilize before taking action. In summary, the atmosphere for an increase in the price of compound fertilizers has been largely created; in the short term, companies will continue to look for opportunities to raise prices. (Feng Hongyang)