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Will urea prices keep rising? Let’s take a look at the details: Author/Source: China Fertilizer Network; Date: 2020-11-23; Clicks: 3. The analysis provided by China Fertilizer Network is largely consistent with that from Xiao Che at the end of October. Around November 10th, the urea market cooled down slightly, with prices in some areas dropping by 20–50 yuan per ton. However, this decline was short-lived. On November 16th, which is this Monday, air quality improved in regions such as Shandong, reducing environmental pressure. As a result, compound fertilizer manufacturers and plywood factories in places like Linyi resumed operations, and urea prices rose again. It’s remarkable that prices increased so quickly after such a slight drop. Not to mention, the factory price of 1,800 yuan per ton in Shandong is already higher than the levels seen in spring, exceeding most people’s expectations; even urea manufacturers are at a loss as to how to proceed with further price increases. Will urea prices keep rising? It might rise, but the room for growth seems limited. Let’s go through them one by one. First, export conditions are good. In the last bidding round, China managed to win contracts for only 586,000 tons, which is less than the initial estimate of 700,000–900,000 tons. However, this amount covered the existing stockpiles of urea produced by manufacturers in Shandong, Hebei, Inner Mongolia and other regions with export advantages, especially the urea produced in Inner Mongolia, which has traditionally been a weak area in terms of urea production ； Other regions also have a high demand for urea, such as Nepal, Canada, Mexico, etc. A major urea manufacturer in Shandong, a large factory in Jiangsu, and another large factory in Hainan all supply products to traders who then export them to these regions ； Another factor supporting this is that India is set to issue new tenders for urea purchases on November 20th or slightly later. Although expectations regarding prices are not high, there is still hope regarding the volume of orders that will be awarded. Even if such hopes do not exist, it is still possible to speculate ahead of any decisions being made on November 27th or slightly later. Secondly, industrial demand is indeed better than expected. Concerned about potential recurrences of the pandemic in the future, compound fertilizer manufacturers have accelerated both the collection of payments and production processes compared to previous years. In the Northeast, approximately 1 million tons of high-tower compound fertilizer production capacity has been added, with payment collection and production underway in an orderly manner ； In the first half of the year, the pandemic led to restrictions on the operation of plywood manufacturers; once orders became available in the second half of the year, these manufacturers rushed to purchase urea and start processing as soon as possible ； The expectation of a cold winter this year has led power plants to purchase urea in advance as preparation. Thirdly, large companies have large quantities of commercially stored urea. In 2020, **9.98 million tons of chemical fertilizers were held in commercial reserves; aside from about 1.5 million tons of potash fertilizers, the rest was urea and compound fertilizers. Whether it’s urea or compound fertilizers, they serve the same purpose – urea is still needed for reserves. As early as August 21, the results of the bidding were finalized. Large agrochemical companies such as Sinochem Zhongnong purchased only small quantities of goods at first. However, it was later learned that the regulations regarding commercial reserves during the off-season require participating companies to have at least 50% of the total reserve amount by the end of the fourth month, and at least 80% and 110% by the end of the fifth and sixth months respectively. The off-season commercial reserve period runs from September to April of the following year. In other words, before the end of December, large agrochemical companies have a critical need for urea reserves. Fourth, there are also many other interfering factors. The volatility in the futures market, the inflow or outflow of foreign capital, the ability of large companies to operate in both the spot and futures markets, as well as the intervention of large amounts of capital from investors who believe it is difficult to recover losses in other areas – all these factors contribute to further increases in urea prices, or rather, to an unusually sharp rise in those prices. In short, based on the four points mentioned above, urea prices are likely to keep rising. However, it is currently winter, a period for stockpiling, and not the peak season for urea consumption in spring and summer, when 60-70% of consumption occurs. Only when the stockpiles are exhausted through sales can a complete cycle be achieved. Although exports are high, there will come a end to them; this might happen in the second half of December or even later. At present, those who are willing to invest more in urea are either customers with essential needs or large companies that are making profits in the futures market. Industry professionals are advised to proceed with caution. (Che Yanhong)