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Weekly Report on the Urea Market by the China Nitrogen Fertilizer Industry Association (December 7 – December 13) Author/Source: China Nitrogen Fertilizer Industry Association Date: 2020-12-18 Clicks: 7 A brief overview of the domestic urea market over the week. In terms of prices and market conditions, the domestic urea market showed an upward trend. In some areas, production at fixed-bed plants was restricted due to policy factors; natural gas supply to such plants was limited in order to ensure sufficient supplies for domestic use. Additionally, companies shifted their production to ammonia production, which led to a significant decrease in domestic urea supply. Company inventories were low, demand remained stable, and the market had strong support. Strains in natural gas supply will continue in the future, leading to further declines in production by gas-intensive enterprises, with an expected reduction in domestic urea supply. The urea market is expected to show a steady upward trend. As of now, the ex-factory price in Shandong is 1,800–1,830 yuan per ton for small and medium-sized particles, and 1,900–1,980 yuan per ton for large particles ； Henan factory price for small particles: 1790–1820 yuan per ton ； The ex-factory price of small particles from Hebei is 1,790–1,820 yuan per ton. In terms of production, sales, and inventory for enterprises: The data from this survey show that the production of small-grained urea this week was 612,400 tons, a decrease of 7.27% on a week-on-week basis ； The output of large-grain urea was 165,100 tons, a decrease of 7.98% on a month-on-month basis ； Sales of small-particle urea amounted to 609,900 tons, a decrease of 7.86 percentage points on a month-on-month basis ； Sales of large-grain urea amounted to 176,500 tons, a decrease of 14.45% on a month-on-month basis ； The production and sales rate of small-particle urea was 99.60%, a decrease of 0.63 percentage points on a month-on-month basis ； The production and sales rate of large-grained urea was 106.92%, a decrease of 8.08 percentage points on a month-on-month basis ； The total inventory was 332,000 tons, a decrease of 5.62% on a month-on-month basis. Regarding the operation rate of enterprises: According to a survey conducted on December 15, 2020, the national daily urea production was around 123,900 tons, with an operation rate of approximately 57.34%. Among these, the operation rate of urea production plants that use coal as raw material was 64.31%, while that of plants using natural gas or coke oven gas as raw material was 39.36%. The operating rate of urea manufacturers across the country dropped by 4.90 percentage points compared to last week, and by 0.87 percentage points on a year-on-year basis. Among them, the operating rate of manufacturers using coal as raw material decreased by 1.71 percentage points compared to last week, and by 2.30 percentage points on a year-on-year basis, while the operating rate of manufacturers using natural gas as raw material dropped by 13.12 percentage points compared to last week, but increased by 2.84 percentage points on a year-on-year basis. ~!@ http://img.yf116.cn/image/img/20201218/1513335481372.jpg In terms of raw materials: the domestic coal market is performing well, with stable supply from the main mining areas; however, road transportation is limited, and demand on the downstream side is relatively high. Vehicles wait in lines at some mining sites to load coal, and coal companies have raised prices, yet market transactions remain active. Currently, the average price of bituminous coal upon arrival at factories is 945 yuan per ton, up 0.32% on a month-on-month basis, down 6.99% on a year-on-year basis, and up 1.72% compared to the same period last month ； The average price of bituminous coal for gasification at the plant was 746 yuan per ton, up 1.36% on a month-on-month basis, 3.90% on a year-on-year basis, and 2.05% higher than the same period last month ； It is expected that the coal market will maintain a steady upward trend in the short term. http://img.yf116.cn/image/img/20201218/1516454964100.jpg Railway transport: Operations are basically normal. Analysis of the situation of domestic urea manufacturers over the week: According to a survey conducted on December 15, 2020, the national daily urea production was 123,900 tons, a decrease of 7.87% compared to the same period last week, and a 4.71% decline on an annual basis ； Among them, coal-producing enterprises had a daily production volume of 100,100 tons, a decrease of 2.59% compared to the same period last week, and a year-on-year decline of 6.62% ； Qiti Enterprise’s daily production volume was 23,700 tons, a 25.00% decrease compared to the same period last week, but an increase of 4.32% on a year-on-year basis. http://img.yf116.cn/image/img/20201218/15171955039100.jpg Analysis of the sales performance of domestic urea manufacturers over the week. In terms of sales, the production-to-sales ratio for urea this week was 101.16%, a decrease of 2.23 percentage points compared to the previous week. Regions where sales have increased significantly include Guizhou, Shandong, Anhui, etc., while regions where sales have declined significantly include Chongqing, Qinghai, Hebei, etc. In terms of inventory: Based on the fact that the production capacity of key enterprises accounted for 86.44% of the total national capacity, the national inventory was around 384,100 tons, a decrease of 22,800 tons compared to the previous period. This represents a drop of 179,800 tons when compared to the 563,900 tons in inventory among urea producers, as recorded by the association during the same period last year. http://img.yf116.cn/image/img/20201218/1518335511316.jpg The ex-factory price of small-grained urea has increased on a month-on-month basis; the average ex-factory price is 1,743 yuan per ton, up by 30 yuan per ton compared to last week, representing a month-on-month increase of 1.75% and a year-on-year increase of 5.70% ； The ex-factory price of large-grain urea increased on a month-on-month basis; the average ex-factory price was 1,789 yuan per ton, up by 11 yuan per ton compared to last week, representing a month-on-month increase of 0.62% and a year-on-year increase of 6.81%. Trends in the international urea market: http://img.yf116.cn/image/img/20201218/1519195515933.jpg Following the intense bidding activity at India’s MMTC, the urea market experienced a pause this week. The trading atmosphere in the spot market has cooled down, transaction volumes have gradually declined, and prices have shown a slight downward trend. In the January spot sales, prices in the Middle East were adjusted to a low of $260 per ton. The plant of Safco 4 in Saudi Arabia appears to be shut down until December, resulting in a decrease in the export of granular urea by Saudi Basic Industries this month. A shortage of natural gas supply in winter in China has caused several urea plants to shut down, reducing their daily production to the lowest levels this year. Coupled with persistently strong domestic prices, this will limit China’s exports. India may issue another tender after a longer period of time; therefore, in the meantime, global suppliers will have to turn to other markets in search of price support. Tendering in India may experience a long pause: heavy arrivals and slowing domestic sales could cause the Ministry of Fertilizers to wait until February next year to issue the final import tender for the Rabi season. China is a market that operates independently, with both export and domestic prices rising. Delayed European demand: Delayed buying activity is expected in Europe in January next year. Egyptian suppliers sold their products in advance and maintained a leading position in the first quarter. Suppliers show promise in the short term, but a prolonged pause in bidding from India could lead to increased downward pressure until the Western market recovers.