Urea remains stable as the year comes to an end
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Urea Remains Stable as the Year Comes to an EndAuthor/Source: China Fertilizer Network
Date: December 14, 2020
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As 2020 draws to a close, the urea market has performed fairly well throughout the year. Towards the end of the year, supply in the urea market dropped sharply. Although demand was weak, overall prices remained stable. As of this weekend, the mainstream ex-factory price of urea in Shandong was 1,800–1,820 yuan per ton. In Linyi, compound fertilizer manufacturers were paying 1,840 yuan per ton for urea. In Hebei, the mainstream ex-factory price was also 1,800–1,820 yuan per ton, while in Henan it was 1,810–1,820 yuan per ton. In Shanxi, the mainstream ex-factory price was 1,740 yuan per ton, with larger granules costing 1,780 yuan per ton. In Sichuan, the mainstream ex-factory price was 1,850–1,885 yuan per ton. Prices in the urea market remain high, and based on the current situation, there is still a possibility of further increases in prices in various regions this month. The main reasons for this are as follows:
Firstly, supply is likely to remain low throughout this month. Around the middle and late part of November, the daily actual production of urea across the country remained at around 150,000 tons, while the lowest daily production level recently dropped to 125,000 tons. Due to environmental regulations and limited gas supply, coupled with the phasing out of some older production units in certain factories in Henan, Zhongyuan Dahuahua had already met its annual urea production target by the beginning of this month. The production rates in Henan, Sichuan and other regions have declined significantly; in Henan, the local production rate is less than 30%, while in the southwest region it is less than 20%. Since mid-month, there have been further signs of a decline in production rates in Sichuan as well. As a result of environmental regulations, only one factory remains in operation in Jincheng, Shanxi. With a large number of companies shutting down recently, the market supply situation has changed suddenly, leading to a shortage of urea in the Zhongyuan and North China regions. However, there is still strong demand from downstream industries such as plate manufacturing, which is why urea prices have risen somewhat recently. Secondly, there is still potential demand in the market, and factory inventories remain at low levels. Recently, the market has seen only moderate purchases from the industrial sector; companies have suspended their seasonal stockpiling activities for winter. However, based on the current inventory levels of raw materials held by compound fertilizer manufacturers, these stocks are likely to last only until around mid-January. There is still demand in the market going forward, but due to previous orders from the Federal Reserve, most factories currently have low inventory levels, which means companies face little pressure to reduce prices. Additionally, with urea manufacturers reducing production volumes, there is no need for factories to lower prices at this time. Finally, rising grain prices drive up fertilizer prices as well. Affected by global tensions this year, there has been a growing demand for grain. In the northeast market, after the sale of fertilizers this spring, inventory levels were relatively low; in some areas, inventory was even zero. Recently, there has been a tendency among retailers at the local level to be cautious about selling, which suggests that prices may continue to rise in the future. Under these circumstances, urea prices are likely to remain at relatively high levels. In summary, although demand for urea in various regions has been weak recently, urea manufacturers are currently under little sales pressure. Urea prices may show some upward trend within this month, but the overall increase is likely to be modest. (Wu Wenchao)