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Can compound fertilizers rise further? Author/Source: China Fertilizer Network Date: 2020-12-14 Clicks: 3 In mid-December, fertilizer prices continued to rise; the prices of nitrogen, phosphorus, potassium-based fertilizers as well as compound fertilizers remained high. In fact, some types of fertilizers, such as urea, were even likely to see further price increases. As of the end of this week, compound fertilizer manufacturers in Linyi were purchasing urea at 1830 yuan per ton. Recently, environmental protection pressures have increased in regions such as Shanxi and Henan, forcing urea manufacturers to suspend production as a result of policy mandates ； In addition, some urea manufacturers that use natural gas as a feedstock in the southwest and Inner Mongolia have also experienced shutdowns or reduced production. Due to the relatively tight supply of natural gas, some of these manufacturers plan to shut down their operations in the short term, which may lead to further slight increases in urea prices. The rise in urea prices has created severe difficulties; however, the prices of other phosphate and potassium fertilizers remain stable. The costs associated with compound fertilizers also continue to provide support. At present, most compound fertilizer manufacturers are raising their prices compared to before, with increases ranging from 50 to 100 yuan per ton. As of this weekend, the prevailing ex-factory prices for 45% chlorinated/sulfated balanced fertilizers across the country were 1850–1945 yuan and 2100–2200 yuan per ton, respectively. Meanwhile, some manufacturers have temporarily stopped accepting orders or providing quotes, indicating potential further price increases. Considering factors such as raw material costs and supply and demand conditions, is there still room for further increases in the prices of compound fertilizers? First, the outlook for phosphorus and potassium fertilizers in the market. As mentioned above, factors such as environmental concerns and gas restrictions are boosting the domestic urea market, leading to relatively stable or upward price trends in the short term. However, given the upward trend observed during the winter storage period, there is limited potential for further price increases in monoammonium phosphate. Most factories are waiting for orders before placing new orders, resulting in relatively stable pricing. Nevertheless, it has been reported recently that the spot price of 55% ammonium phosphate held by traders is around 2000 yuan, which is slightly lower than the prices offered by factories ； The market for potassium fertilizers remains stable overall with only minor fluctuations; only due to factors at the end of the year did prices of potassium chloride at some ports drop slightly, while the overall trend remained strong. Secondly, the demand outlook. Following the rise in the prices of compound fertilizers, winter storage markets in many areas have remained relatively stagnant, with few cases of downstream buyers replenishing their stockpiles. Overall, there is still some remaining demand on the downstream side; a small number of new orders may emerge before the Spring Festival. One reason for this is that there are no expectations of significant fluctuations in raw material prices in the short term, and minor adjustments will have little impact on the prices of compound fertilizers. Moreover, the current price level of compound fertilizers is roughly on par with that of the same period last year ； The second reason is that dealers will gradually see an inflow of funds around New Year’s Day. With grain prices remaining high this year, there is a strong tendency on the part of retailers to hold back sales; it is expected that sales will start to resume once January arrives. Finally, the supply market. As of this weekend, the overall operating rate of major compound fertilizer manufacturers across the country was around 49%, a 5% decrease from last week. The reasons for this include the cold weather in winter, which has led to a severe decline in air quality in some areas in the north; **strict environmental regulations have forced some compound fertilizer manufacturers to reduce their production capacity or even shut down their operations ； The second reason is that in the winter storage market, most companies are still focused on fulfilling previous orders, with new orders coming in slowly. Since the actual time for using fertilizer is still far away, sales have not yet begun, so distributors are not picking up goods at a rapid pace. This has increased inventory pressure at some factories, resulting in an operating rate of around 50% in the short term. In summary, factors such as the impossibility of further increases in raw material costs, pending demand that needs to be met, and no pressure on the supply side indicate that fertilizer prices are likely to remain stable in the future; even if some companies continue to call for price increases, it will merely be an artificial increase. (Feng Hongyang)