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Third wave of price increases for compound fertilizers – is it imminent? Author/Source: China Fertilizer Network Date: December 2, 2020 Click-through rate: 3 As December begins, the winter storage market for fertilizers enters its final phase. With the conclusion of the Phosphate and Compound Fertilizer Conference, the trends in the winter storage of compound fertilizers will become increasingly clear. After several rounds of price adjustments, currently, the prices of compound fertilizers in many regions have risen to varying degrees compared to earlier levels; the increase is generally over 100 yuan per ton. Although this price hike hasn’t been met with a positive response from downstream buyers, manufacturers are still maintaining high prices, and there are many indications that prices will continue to rise. During November, the compound fertilizer market remained stagnant overall; most companies focused on fulfilling prior orders, with new orders coming in slowly. Sudden positive developments helped push up the prices of compound fertilizers, yet there was growing resistance from end-users, forcing companies to set prices cautiously. Following periods of suspension of collections and price reporting, some companies are set to announce the third round of pricing for the winter storage period in the near future. Unsurprisingly, these prices are expected to rise again. With the market strongly resisting high prices, what exactly is driving fertilizer manufacturers to raise prices time after time? Firstly, raw material costs provide strong support. Although the prices of raw materials appear to be fluctuating, they remain at high levels; prices of nitrogen, phosphorus, and potassium have risen significantly, leading to a substantial increase in the raw material costs for compound fertilizer manufacturers. Demand for urea in the domestic market is moderate. New pricing guidelines are about to be introduced, and urea prices in various markets are fluctuating slightly, with investors waiting for further guidance from those guidelines. If large quantities are purchased, better prices can be expected, and in the short term, price increases are likely to occur ； The price of monoammonium phosphate remains high; manufacturers have numerous pending orders, which restricts the acceptance of new orders. As a result, supply is tight and prices continue to rise ； Salt Lake Company has raised the price of potassium chloride by 70 yuan; as of December 1, the price for 60% potassium supplied to agents at the delivery site is 2,020 yuan per ton. Secondly, downstream demand remains stagnant in the short term. Apart from raw material costs, for the price increase of compound fertilizers to be fully supported by demand from downstream users, it is crucial that this happen. Compared to other seasons, the winter storage period is longer, which naturally increases operational risks; as a result, dealers tend to be cautious. To date, the progress of winter storage varies across different regions, with some local areas having already stocked around 50% of the total required amount. There is little willingness to increase stockpiles after the price rise, and some dealers even say they will purchase only as needed after the Spring Festival. This situation increases market pressure ahead of the festival; while companies keep calling for price increases, downstream users remain hesitant to act, and a situation of high prices but low supply may continue. Finally, the market is largely bearish on future trends. Rising raw material costs are the main factor driving up the price of compound fertilizers; once these raw materials become cheaper in the future, it’s hard to predict what will happen to the prices of compound fertilizers. With the holding of the phosphorus compound fertilizer conference, the trend for winter stockpiling has become fairly clear. Market analysts generally believe that prices will remain stable before the Spring Festival. As for next year’s sales season, there is a pessimistic outlook; one reason for this is that current prices are somewhat inflated, and some companies claim that price increases will only occur when there is an ample supply, with short-term revenue fluctuations having little impact ； The second reason is the excessive rise in raw material prices, which is mostly due to a shortage of supply. Once the export market cools down and domestic demand slows down, it is likely that factories will reduce prices in order to sell their goods. In summary, the increase in the price of compound fertilizers is now a fact. Given that there is still plenty of time, the author believes there’s no need to panic; dealers who must obtain these fertilizers before the New Year can wait until after New Year’s Day to make their arrangements. (Feng Hongyang)