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The increase in urea prices was orchestrated artificially; optimism is cautious regarding the rise in ammonium chloride prices. Author/Source: China Fertilizer Network. Date: 2020-11-23. Clicks: 4. The scenario of rising urea prices has been going on for some time now, with domestic prices remaining stable at high levels despite slight fluctuations. However, some companies continue to raise urea prices – for example, the purchase price of urea in Linyi, Shandong, has seen a slight increase, while the freight costs for urea in certain areas of Shanxi have also risen slightly； However, during the off-season in the agricultural market, there is often a situation where goods are available for sale at wholesale prices but no demand exists; relying solely on industrial demand seems insufficient. Some manufacturers fail to see any reason for further price increases, believing that raising urea prices even more would be self-inflicted. Meanwhile, the market trend for ammonium chloride is favorable; its price has risen slightly before remaining stable. It has greater stability compared to the sharp fluctuations seen in the past. So, if there is little increase in urea prices, what impact will that have on ammonium chloride? And how will supply and demand for ammonium chloride itself change? Currently, the market for ammonium chloride in our country is favorable, with prices remaining stable. Manufacturing companies are not in a hurry to adjust prices, and there are sufficient pre-orders, allowing operations to continue until the end of the month or early next month ； Controlling orders or temporarily stopping them is a common phenomenon in the market, with local prices showing a slow and moderate upward trend. Currently, the standard ex-plant price for wet ammonium in the East China region is around 430–460 yuan per ton, while in the North China region the standard ex-plant price for dry ammonium is around 580–600 yuan per ton. New orders should be placed at prices as close to these higher levels as possible. Firstly, urea prices remain stable at high levels, which continues to provide support for ammonium chloride. Environmental regulations limiting production may increase the costs for urea manufacturers in the southwest, resulting in some of these companies operating at reduced capacity ； Additionally, the price of liquid ammonia is high; even if companies shift their production focus to liquid ammonia, the profits remain promising. Of course, some companies have already chosen to shift their production to this area. However, from the perspective of demand, although the demand from industrial plywood factories is relatively strong, the agricultural market is in a slow season, and fertilizer manufacturers are cautious about their purchases. Compared to urea, low-priced ammonium chloride is more favored; yet urea has the advantage of price support in the later stages. Even though there is a significant difference between domestic and international prices, urea might still be subject to speculation, and it is likely to remain at high levels with only slight fluctuations. The impact on ammonium chloride also changes accordingly. Secondly, although the operating capacity of ammonium chloride manufacturers itself is not low, there is a significant amount of inventory waiting to be shipped. Affected by environmental inspections, the production levels of some ammonium chloride manufacturers in Henan and Shaanxi provinces have been slightly lower; production at some enterprises in other regions has also been restricted. According to statistics from China Fertilizer Network, the overall industry production rate for caustic soda manufacturers is currently around 73.3%. Although the price of soda ash is low and has fallen significantly at a rapid pace, based on the price per two tons, enterprises will maintain a high level of production in the short term ； Ammonium chloride manufacturers have sufficient orders pending, with the volume available for delivery generally sufficient to last until the end of the month or early next month; in some cases, it can even last until near the end of next month. Thus, there are solid reasons for these companies to maintain their prices or to raise them slightly. Once again, the fulfillment of pending orders for ammonium chloride was good, but demand for new orders was average. Firstly, urea prices remain high. Under cost pressures, some compound fertilizer manufacturers have turned to using ammonium chloride as a substitute for part of the urea. Additionally, new high-tower compound fertilizer plants in the Northeast region are contributing to an overall increase in demand for ammonium chloride ； Secondly, the operation of ammonium chloride granulation enterprises has seen a recovery, leading to an increase in purchases of ammonium chloride ； Thirdly, unlike the same period in previous years, there is no minimum sales guarantee this year, allowing for smoother product sales and pricing in the market. However, at present, downstream compound fertilizer manufacturers and enterprises that produce extruded granular ammonium chloride have sufficient stockpiles of raw ammonium chloride, and traders have also purchased some ammonium chloride in advance. Taking all these factors into account, there is indeed a sufficient amount of orders pending fulfillment for ammonium chloride manufacturers, but the pace of new orders in certain areas has slowed down slightly. Overall, considering factors such as the high price of urea providing support, the tight supply-demand balance for ammonium chloride itself, and the industry’s expectations regarding the reduction of production capacity in the future, all these elements act as supports for the ammonium chloride market. It is expected that favorable conditions will prevail in the ammonium chloride market in the short term, with prices continuing to rise steadily. However, given the slowing demand for new orders, any increase in prices would be limited; thus, the market trend can be described as cautiously optimistic, with only slight fluctuations. (Tan Junying)