Thread Content
Continuous suspensions of reporting and collections – could compound fertilizers rise further? Author/Source: China Fertilizer Network Date: 2020-11-23 Clicks: 2 In the past two days, heavy snowfall has hit large areas in the northern region, officially marking the onset of winter. As the season approaches, winter storage markets for fertilizers have arrived as scheduled. It is no exaggeration to describe the start of this year’s winter storage period as bustling. The overall rise in fertilizer prices has added uncertainty to these markets, but it has also reversed their previous sluggish trend, bringing more interest to the competitive dynamics at play. The rise in prices of most raw materials and fertilizers has driven up the costs of compound fertilizers intended for winter storage. After several rounds of price adjustments, the current quotes offered by manufacturers are 100–200 yuan per ton higher than before. Yet, at a time when downstream users are just beginning to accept these higher prices, some compound fertilizer manufacturers have once again resorted to unusual tactics, stopping their quotes or refusing to accept payments. There are many companies that plan to raise prices further, and most of them are determined to hold their prices steady. Is there still room for further increases in the prices of compound fertilizers? First, the forecast for raw material prices. At present, raw material prices remain at relatively high levels. Compared to phosphate and potash fertilizers, the price of urea fluctuates frequently, but it stays high overall. There are various opinions regarding the rumored pricing plans from India; indeed, India faces a demand gap of 1.6–1.8 million tons by the end of the year. As for the extent to which Chinese suppliers will be involved and what their prices will be, it is still uncertain ； After the ex-factory price of 55% powdered monoammonium exceeded 2,000 yuan per ton, the purchasing behavior of compound fertilizer manufacturers also became more rational; even if prices rise further, the potential for increase is likely to be limited ； The potassium fertilizer market may appear calm, but in reality prices are relatively stable. Secondly, pre-holiday demand expectations. As the winter storage market progresses, the overall stockpiling level among downstream users is fairly good; in some areas, 40-50% of the total amount has already been stocked, and more goods are continuing to arrive. As the saying goes, having stock means no need for worry. If the price of compound fertilizers continues to rise, not many dealers will decide to purchase goods in large quantities before the holiday. One reason for this is that the prices of these goods in advance are too low – the price of certain products is even 300 yuan/ton lower than the current level – so dealers naturally won’t agree to pay such high prices ； The second reason is that a strategy of waiting for prices to rise is more stable; taking risk factors into account, some distributors choose to wait and see. After the holiday, regardless of the price level, demand from downstream customers will remain steady, so at least the possibility of suffering losses is much lower. Finally, the expectation of rising prices for diammonium. Since the start of the autumn market, the price of diammonium phosphate has seen a strong upward trend, with prices continuing to rise. Currently, the purchase price of 64% diammonium phosphate at delivery points in Heilongjiang Province has reached 2800 yuan per ton. As a substitute for compound fertilizers, whether the price of diammonium phosphate will continue to rise is an important factor to consider in determining the future trend of compound fertilizer prices. It is clear that the main reason for the high prices of diammonium phosphate in the domestic market this year is the demand from the export market. Most diammonium phosphate factories in Hubei have export orders that will need to be fulfilled until around December. It remains unclear why diammonium phosphate can maintain high prices after the export market’s demand subsides. Additionally, many downstream distributors are reluctant to purchase more of this product; if domestic demand does not increase, then the prices of diammonium phosphate will likely reach their peak. In summary, after the phosphate fertilizer meeting at the end of the month, the market situation for winter stockpiling of compound fertilizers is likely to become clearer. In the short term, raw material prices will remain strong; as a result, compound fertilizer manufacturers tend to maintain high prices, and it is expected that there will still be a slight upward trend in prices going forward. (Feng Hongyang)