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Urea exports continue to rise, but will prices stay stable or fall? Author/Source: China Fertilizer Network Date: 2020-11-30 Clicks: 14 According to Chinese customs statistics, in October 2020, China’s urea exports reached 1.092 million tons, a 67.4% increase compared to the previous year. This figure far exceeded that of other months this year, as expected. In October, a total of 2.184 million tons of urea were awarded in tenders, with China accounting for around 586,000 tons; the shipping date was set for November 16. Additionally, the latest tender’s shipping date is January 16, indicating that China’s urea exports will continue to rise during November and December. Since November 22nd, the price of urea in our country has either remained stable on the surface while actually declining, or it has dropped by 20-30 yuan per ton. Although some manufacturers reported a slight increase in prices on the 27th and 28th, this trend has not yet become widespread. Will urea prices rise next? Stable or falling? I personally lean towards the latter. Why? As is well known, the factors that have contributed to the rise in urea prices during this off-season this year are exports and national reserves. Since 2020, China’s urea exports have been higher than in the same period last year, but they may not be as high as expected. From January to October, exports amounted to 4.023 million tons, compared to 3.891 million tons during the same period last year. Given the expected high export volumes in November and December, this year’s total exports could increase by 1 million or even 2 million tons year-on-year. However, it is worth noting that throughout most of November, domestic market prices were significantly higher than export prices—by 50 yuan per ton, and in some regions by as much as 100 yuan per ton. As a result, most manufacturers lacking a competitive edge in exports have shifted their focus to the domestic market. In particular, under the newly implemented import quotas, China is likely to have only 300,000 tons of urea available for export. Even though the volume of urea exported to high-price markets in November and December may exceed that of the same period last year, it is probable that exports will rise by over 1 million tons year-on-year; however, reaching an increase of 2 million tons remains difficult. In short, the upward pressure on prices caused by urea exports stems from two factors: temporary shortages in supply in China due to export shipping schedules, and an elevated atmosphere in China’s domestic market. Considering the slight increase in overall urea production capacity this year, output has also risen on a year-on-year basis; in November, the daily urea production was around 150,000 tons, which is more than 15,000 tons higher than the same period last year. Apart from being exported, most of this urea ends up in the warehouses of the companies responsible for storing it. It is reported that some of these storage companies already hold more than one-third of the total urea stockpile, which brings them close to the 50% target by the end of December. What follows is a competition between these storage companies and urea manufacturers; therefore, it is likely that urea prices will remain stable or decline, unless there is a significant increase in prices as indicated in the official announcements, in which case China’s urea exports could exceed 300,000 tons. Given the continuous delays in India’s approval process, it is unlikely that China’s urea manufacturers will be able to ship their products to the ports smoothly. In summary, given that China’s urea products are likely to win bids in this tender process, it is essential to meet the **fertilizer commercial reserve targets for 2020. There is demand for urea from industrial compound fertilizer manufacturers, power plants, and plywood factories. Additionally, some urea producers have planned maintenance work or will reduce production due to high natural gas costs. As a result, urea prices are likely to remain stable or decline in December, with the drop probably not being significant; any occasional increases are more likely to be driven by speculation.