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Urea: What’s Different in 2020 Author/Source: China Fertilizer Network Date: 2020-12-21 Clicks: 16 As 2020 comes to an end, looking at the overall trend of urea prices this year, there was less refinement and gentleness, and more roughness and volatility. From the beginning of the year, various unexpected events kept occurring, resulting in significant fluctuations in prices. To learn from the past, let’s take a look at the unexpected developments that occurred in the urea market this year. The first surprise: the pandemic hit suddenly. Since January of this year, the term “COVID-19” has become the most popular topic across the internet. In China, various restrictions were implemented starting at the end of January, and the urea industry was not spared by these measures. As attention to the pandemic increased, even within the fertilizer industry, by February the volume of goods available on the market was relatively low, and transportation was greatly affected. As a result, urea prices soared; the price of large-grain urea from Heilongjiang reached 2,170 yuan per ton, marking the highest price for urea this year. From a price perspective alone, the pandemic has had a positive impact on the sales of urea in the spring. The second variable: India’s frequent tenders. Affected by the global pandemic, the overall operating rate of urea production in India has declined, while demand has remained relatively stable. As a result, India’s reliance on imported urea has increased sharply. In terms of pandemic control measures, transportation distances, and the availability of supply, India is more eager to purchase urea from China than it was last year. The number of tenders issued by India throughout this year were particularly surprising to industry experts. Although shipping conditions were generally tight and, given China’s production levels at that time, the total amount of urea awarded through these tenders was not large, the continuous tendering by India has led to an upward trend in international prices. Supported by these Indian tenders, domestic urea prices rebounded during the off-season in July, and this recovery lasted for an extended period of time. Third addition: large supply volume, but low supply pressure. Last year, most urea manufacturers were able to remain profitable considering the costs involved. In addition, due to the phasing out of some older production facilities in previous years, new facilities were built by certain companies, and those that had been shut down for a long time plan to resume operations this year. According to data from China Fertilizer Network, with the exception of the last month, the daily urea production volume this year was higher than it was during the same period last year. However, most factories say that the overall inventory pressure is lower this year, mainly due to the amount of inventory carried over from previous periods and the impact of this year’s monetary policy measures. Fourth point: A significant reduction at the end of the year. As of mid-October, most factories had not yet received any notices regarding production cuts or restrictions. However, starting in November, production limits were imposed on urea production in the Shanxi region. According to the documents issued at that time, urea production in Jincheng could be reduced by over 2.5 million tons. By mid-December, production activities in that area might resume to some extent, but due to worsening environmental pollution, the production shutdowns in Jincheng were extended ； On the other hand, although these ammonia-producing enterprises started reducing production later than in the same period last year, the extent of such reductions was greater. Starting from early December, many of these enterprises began to suspend production, and it would take at least until after January before they could resume operations. As a result, overall supply declined significantly; by mid-December, the daily urea production had dropped below 120,000 tons. In summary, the overall supply of urea at the end of 2020 was relatively low. Although demand from downstream industries has been moderate recently, based on the current production levels and the planned restart times for factories, it is expected that urea supply will remain stable until the end of the year, with no significant decline expected before most urea-producing enterprises resume operations. (Wu Wenchao)