Thread Content
Urea Prices Fluctuate Like a Seven-Time Capture and Release – Author/Source: China Fertilizer Network, Date: 2020-11-20, Clicks: 20. Urea prices keep rising and falling, similar to a pattern of seven captures and releases, yet they remain high overall. Although there is a supply but no demand at the agricultural wholesale level, and weakening industrial demand leads to a slight drop in urea prices in some areas, these prices soon recover again in a gradual manner. For example, the purchase price of urea by compound fertilizer manufacturers in Linyi dropped to 1,800 yuan per ton before rising back to 1,820 yuan per ton； In the remaining markets, urea prices remain high. Urea manufacturers have a sufficient amount of orders pending fulfillment, while traders are cautious in their dealings with urea. Fertilizer manufacturers have raised their own prices thanks to the increase in the costs of raw materials such as urea; however, due to sales pressures, they are reluctant to purchase urea. Additionally, environmental inspections have restricted the operations of some plywood factories, resulting in a reduced demand for urea. The frequent fluctuations in urea prices at this stage are cause for concern. Environmental regulations limiting production, along with maintenance work on industrial facilities, have resulted in lower operational rates for some urea manufacturers, leading to a relatively tight supply of urea. For example, the average ex-factory price of small-particle urea in the Shanxi region has risen to around 1710–1720 yuan per ton. In the southwest region, urea manufacturers that use natural gas face increased costs due to rising natural gas prices, which has pushed the average ex-factory price of urea there to around 1730–1780 yuan per ton. Despite expectations of printed labels and the upcoming phosphorus-based fertilizer conference, the industry remains concerned about the high price of urea, and this needs to be considered from both supply and demand perspectives. Firstly, the operating capacity of urea manufacturers remains low, with little possibility of an improvement; instead, there may even be a trend toward further decline. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises in the industry is around 54.12%, with a daily production volume of approximately 152,000 tons. Apart from those enterprises that have been shut down for long periods, some urea production facilities in Shanxi Province are operating at reduced capacity due to environmental regulations. In parts of East China, there have also been temporary reductions in production or shutdowns as a result of environmental inspections. Additionally, enterprises in parts of North China report that transportation is restricted owing to environmental constraints. It should also be taken into account that urea production facilities in the Southwest and Inner Mongolia regions have seen reduced output due to gas supply restrictions ； Additionally, liquid ammonia prices remain high at present; companies have an advantage whether they produce urea or shift their focus to liquid ammonia. Even if there is a slight drop in liquid ammonia prices, the extent of such a drop is limited for now, so the support for urea production remains strong. Secondly, in terms of demand, industry and agriculture complement each other. During the off-season for agricultural demand, urea prices rise in local markets yet there is no demand to match; although there will be some need for fertilizers in the future, the overall demand remains limited. Both fertilizer suppliers and local farmers are adopting a wait-and-see approach, planning to purchase as needed in the future ； Large traders are quite concerned about the high prices of urea; the stock levels of industrial urea are satisfactory, but caution is exercised regarding the stock levels of agricultural urea ； Initially, supported by low inventory levels, compound fertilizer manufacturers raised their prices amid rising costs of various raw materials. However, strong resistance from end-users led to difficulties in both raising prices and selling these fertilizers. The sharp increase in raw material costs further increased their operational pressures, reducing their willingness to produce. As a result, overall industry production remained at low levels, which is unfavorable for the demand side regarding urea prices. In addition, the minor nitrogen fertilizer ammonium chloride also has a certain impact on urea. It is expected that the price of ammonium chloride will improve in the near future, but the increase will be limited. With urea prices remaining high, some compound fertilizer manufacturers, under cost pressures, have chosen to use ammonium chloride as a substitute for part of the urea, and it is quite popular for this purpose. Another new Indian tender will likely be released in the near future. However, based on the current domestic and international prices of urea, industry experts say that if the pricing determined this time does not align with domestic prices, it will provide limited support for the domestic urea market; therefore, it is necessary to keep an eye on any updates regarding these pricing decisions. Overall, in the short term, there is a tight balance in urea supply while demand remains relatively strong. Additionally, the results of the bidding process in India are still pending, and these could have an impact in the future. It is expected that there will be little change in urea prices in the short term, with only slight fluctuations; prices will likely remain at high levels. (Tan Junying)