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China Nitrogen Fertilizer Industry Association’s Weekly Report on the Urea Market (December 14 – December 20) Author/Source: China Nitrogen Fertilizer Industry Association Date: 2020-12-23 Clicks: 26 A brief overview of the domestic urea market over the week. In terms of prices and market conditions: The domestic urea market showed an overall upward trend. Due to restrictions on natural gas supply, most manufacturers had to shut down their operations as a result of limited gas supply; thus, the production rate continued to decline and supply dropped significantly. Supply is tight in the southwestern region, and downstream demand in the North China region has weakened due to efforts to control pollution in that area. However, the overall reduction in supply provides strong support for the market, driving prices upward continuously. The urea market is expected to maintain a steady upward trend next week. As of now, the ex-factory prices in Shandong are 1,800–1,830 yuan per ton for small and medium-sized particles, and 1,900–2,000 yuan per ton for large particles ； Henan factory price for small particles: 1800–1820 yuan per ton ； The ex-factory price of small particles from Hebei is 1,810–1,830 yuan per ton. In terms of production, sales, and inventory for enterprises: The data from this survey show that the production of small-grain urea this week was 557,200 tons, a 9.01% decrease compared to the previous week ； The output of large-grain urea was 162,400 tons, a 1.62% decrease on a month-on-month basis ； Sales of small-particle urea amounted to 597,200 tons, a decrease of 2.08 percentage points on a month-on-month basis ； Sales of large-grain urea amounted to 171,400 tons, a decrease of 2.92% on a month-on-month basis ； The production and sales ratio for small-particle urea was 107.19%, an increase of 7.69 percentage points on a month-on-month basis ； The production and sales rate for large-grain urea was 105.50%, a decrease of 1.42 percentage points on a month-on-month basis ； The total inventory was 311,600 tons, a decrease of 6.15% on a month-on-month basis. Regarding the operational rate of enterprises: According to a survey conducted on December 22, 2020, the national daily production of urea was approximately 112,900 tons, with an operational rate of around 52.26%. Among these, the operational rate of urea production plants that use coal as raw material was 64.54%, while that of plants using natural gas or coke oven gas as raw material was 20.54%. The operating rate of urea manufacturers across the country decreased by 5.09 percentage points compared to last week, and by 1.99 percentage points on a year-on-year basis. Among them, the operating rate of manufacturers using coal as raw material increased by 0.23 percentage points compared to last week, and by 0.62 percentage points on a year-on-year basis, while the operating rate of manufacturers using natural gas as raw material dropped by 18.82 percentage points compared to last week, and by 8.73 percentage points on a year-on-year basis. http://img.yf116.cn/image/img/20201223/165856108583.jpg In terms of raw materials: Last week, the domestic coal market continued to show an upward trend. Production in coal mining areas remained stable, demand entered its peak period, transactions in the market were good, and downstream buyers were active; overall, supply and demand in the market were in balance. Due to factors such as road traffic restrictions and limited railway transport capacity, prices are on the rise. At present, the average price of bituminous coal upon arrival at factories is 961 yuan per ton, up 1.69% on a month-on-month basis, down 4.76% on a year-on-year basis, and up 3.78% compared to the same period last month ； The average price of bituminous coal for gasification at the plant was 757 yuan per ton, up 1.47% on a month-on-month basis, 5.14% on a year-on-year basis, and 2.57% 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/20201223/1658516113119.jpg In terms of railways: transportation is operating normally. Analysis of the situation of domestic urea manufacturers over the week: According to a survey conducted on December 22, 2020, the national daily urea production was 112,900 tons, which represented a 8.87% decrease compared to the same period last week, and a 6.82% decline on an annual basis ； Among them, coal-producing enterprises had a daily production volume of 100,500 tons, an increase of 0.36% compared to the same period last week, but a decrease of 2.34% on a year-on-year basis ； The daily production volume of Qi Tou Enterprise was 12,400 tons, a decrease of 47.82% compared to the same period last week, and a year-on-year decline of 32.08%. http://img.yf116.cn/image/img/20201223/1659426118210.jpg Analysis of the sales performance of domestic urea manufacturers over the week. In terms of sales, the production and sales ratio for urea this week was 106.81%, an increase of 5.65 percentage points compared to the previous week. Regions where sales have increased significantly include Yunnan, Hebei, and Heilongjiang, while regions where sales have declined markedly include Qinghai, Sichuan, and Ningxia. 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 360,500 tons, a decrease of 23,600 tons compared to the previous period. This represents a reduction of 152,200 tons compared to the 512,700 tons in inventory among urea producers, as recorded by the association in the same period last year. http://img.yf116.cn/image/img/20201223/170356123554.jpg The ex-factory price of small-grained urea has increased on a month-on-month basis; the average ex-factory price is 1,753 yuan per ton, which represents an increase of 10 yuan per ton compared to last week’s price, an increase of 0.57% on a month-on-month basis, and a rise of 6.37% on a year-on-year basis ； The ex-factory price of large-grain urea increased on a month-on-month basis; the average ex-factory price was 1,812 yuan per ton, up by 23 yuan per ton compared to last week, representing a month-on-month increase of 1.29% and a year-on-year increase of 7.66%. Trends in the international urea market: http://img.yf116.cn/image/img/20201223/171336129360.jpg As the year comes to an end, activity in the urea market is weak; spot prices remain largely unchanged at their current levels, with waiting to be seen what will happen during the next round of purchases to determine price trends. There are also some exceptions. Prices for Brazilian pellets have risen to over $280 per ton CFR. Barge sales in Nola confirm a slight increase in U.S. prices this week, while granular urea in Egypt is available at as low as 280 short tons per ton FOB in Europe. At the same time, without India’s support, urea prices in the Middle East dropped slightly. The sluggish market may continue until early next year. By then, seasonal purchases from the United States and Europe should help ease demand, but suppliers may have to lower their price expectations due to delayed purchases in India. Slowing sales in India: The significant slowdown in urea sales indicates ample inventory levels, which increases the likelihood that India will not be able to return to the market before the end of February. China: China’s daily urea production has dropped to around 120,000 tons, and the offshore price index has risen to unfeasible levels, resulting in a collapse in exports. Rising prices in the U.S.: Despite a modest recovery this week, prices in the U.S. remain at deficit levels. Further rate hikes will be needed in the next quarter to absorb spot tons. Currently, the market is in a state of waiting; if the resumption of operations in India takes too long, it could put pressure on urea prices.