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Print marks appear: Is a rise in urea prices starting? Author/Source: China Fertilizer Network Date: 2020-11-30 Clicks: 14 Although this tender was announced at the beginning of the bidding period, and there were market rumors that India faced a shortage of 1.6–1.8 million tons at that time, most domestic industry players responded rather indifferently to these rumors. This was mainly because prices in mainland China had not yet aligned with international averages; if there was excessive publicity regarding the Indian tender, it could lead to a sharp decline in the domestic market. The market is waiting for the results of the Indian bidding on December 1st. However, this Friday, a factory in Shandong stated that due to a recent export order of 50,000 tons, along with an additional 20,000 tons in new domestic orders, its pricing has increased. Some companies have followed suit in raising their prices. Currently, the mainstream ex-factory price of urea in Shandong is between 1,760–1,800 yuan per ton. In Linyi, compound fertilizer manufacturers are offering a purchase price of 1,790 yuan per ton for urea. In Hebei, the mainstream ex-factory price is 1,800 yuan per ton, while in Henan it is 1,780–1,790 yuan per ton. In Heilongjiang, the ex-factory price of urea first dropped before rising to around 1,860 yuan per ton. However, recently, some downstream customers have shown less enthusiasm for purchasing, and this price increase may also be driven by speculative factors. According to market information, the intended arrival price of urea at ports is around 1,780 yuan per ton. Taking into account various port fees and the current exchange rate, the intended export price of urea from China is not less than 280 US dollars per ton. Recent international prices indicate that the arrival price of urea in India is also around 285 US dollars per ton. It is expected that there will be a slight price increase in certain regions as a result of this rebound. However, prices in other regions may remain stable. The main reasons for this are as follows: First, companies that have advantages in terms of port access are likely to raise their prices. According to industry insiders, China’s intended bidding volume this time is likely to exceed 400,000 tons. Given this amount, the inventory pressure on domestic urea manufacturers will not be effectively reduced. Considering cost factors, some urea producers in the northern regions of China may face shortages as a result of this bidding process. The companies that win orders will experience less sales pressure in the short term, and prices may remain stable at high levels for some time. The main reason for the price drops is the relatively weak demand in the domestic market: since October, some downstream compound fertilizer manufacturers have begun to stockpile raw materials. Coupled with the stricter requirements for commercial inventory levels of fertilizers this year, many urea producers have low inventory levels. As downstream procurement activities progress, some compound fertilizer manufacturers now have around 40% of their raw material inventory covered; although there is still a demand gap in the future, there is no need to rush into purchasing. This year, the supply of urea is higher than it was during the same period last year. India’s bidding process has not yet been finalized, and based on current market estimates, the export supply is not likely to last very long. As a result, some urea manufacturers in southern regions are under pressure, and prices may decline. On the other hand, the reverse price gap among intermediaries still exists. Due to the large number of orders placed at low prices in the early stages by companies, as these orders are fulfilled, there is an increasing supply of goods available at low prices in the market. Recently, the rise in urea prices has slowed down, which has increased the fear among some traders; moreover, the possibility of price reversals is also on the rise. At present, there are still no outstanding futures contracts, so whether it is to recover funds or to avoid risks, it is expected that intermediaries will continue to sell goods at low prices in the near future. Taking all of the above into account, and assuming no significant increase in demand in India, it is expected that while the domestic urea market will see a slight rise, demand within the country remains weak, leaving room for prices to decline to some extent. (Wu Wenchao)