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2020 ends with a slight rise – will 2021 see further increases? Author/Source: China Fertilizer Network Date: 2020-12-30 Clicks: 21 Looking back at 2020, the price trend of sulfuric acid AN can be summarized in sixteen words–a slight increase in spring, a minor decline in summer, and first a small drop followed by a sharp rise in autumn and winter. Price adjustments due to fluctuations occur frequently, but the cumulative increase is usually only around 50 yuan per ton. In the first half of March alone, the price rose by nearly 100 yuan; at one point, the mainstream ex-factory price reached 500–600 yuan per ton. Only during October and November was the price increase more sustained, with the mainstream ex-factory price rising from 485–550 yuan per ton to 520–575 yuan per ton. In December, the price of sulfuric acid AN remained stable at high levels. By the end of December, prices saw a slight increase in regions such as Shandong, Liaoning, Hebei, Tangshan, Inner Mongolia, and Jiangsu, ending the month on an upward note. Will prices continue to rise in 2021? Looking back at the trends from 2019 to 2020 can once again help us clarify the factors related to price increases or not. For example, we once again understand that price increases for sulfuric acid AN during peak seasons are inevitable; the onset of such peak seasons tends to occur earlier or later than in the previous year. Moreover, tight shipping schedules for exports have a greater impact on the sulfuric acid AN market than when export orders are first placed. There is no clear pattern regarding the optimal timing for manufacturers of compressed particles, distributors, and compound fertilizer companies to purchase sulfuric acid AN – the right time to buy is simply when it can be sold. The phasing out of coking-grade sulfuric acid AN production facilities only serves to support prices, or at best leads to a slight increase; it is export demand or domestic demand that truly drives significant price rises. Let’s take a closer look at the factors that will drive further growth in 2021. First of all, both export demand and domestic demand are likely to perform well in 2021; the impact of domestic demand may be more noticeable in the first half of the year. Given the emphasis placed on crop cultivation and food security, sulfuric ammonia, as one of the nitrogen fertilizers that can replace urea in rice cultivation, is expected to see strong demand. However, due to the cold winter in 2020, the fertilizer application season in spring 2021 might be delayed slightly. Companies that produce compound fertilizers, those that manufacture granulated fertilizers, and traders are likely to start purchasing and selling in large quantities around March, possibly after mid-March ； Due to the very high volume of exports in the last months of 2020, exports from January to November 2020 reached 7.66 million tons, representing a 20.8% increase on a year-on-year basis – this was the highest record for AN sulfate exports. Exports may slow down in the first half of 2021, but then pick up again in the second half; overall, AN sulfate exports for 2021 are expected to increase slightly compared to 2020, provided that the international pandemic does not worsen and the global economic situation remains stable. Secondly, urea prices are likely to remain weak, although they may provide some support for the price of sulfuric acid AN. Retail distributors and farmers have been very cautious about purchasing urea. The off-season for urea in 2020 was not actually off-season, with prices remaining high. It is estimated that during the spring and summer of 2021, urea prices will not see a significant increase; at best, there might be a slight rise, and it is likely that the total volume of urea in national reserves will remain below 9.98 million tons. Urea prices are likely to decline during the spring, and for most of 2021, the supply of urea will exceed that of the same period in 2020. Therefore, in the first half of 2020, urea will only provide slight support for sulfuric acid AN prices, while in the second half of the year, urea prices could drop below the cost level, leading to a decrease in urea production rates. This could result in another increase in urea prices, thereby providing more support for sulfuric acid AN prices. Of course, these predictions are based on the assumption that the prices of the raw materials used in urea production, namely coal and natural gas, will remain at their current levels, as well as the assumption that policies will remain unchanged. Finally, considering the capacity replacement of coking units by the end of 2020, supply in 2021 is expected to be lower than that in the same period of 2020. This is because 21 coking units in Shanxi, 39 in Henan, and others in Hebei will withdraw from the market by the end of the year, while the new large-scale units that will take their place are likely to come online only in the second half of 2021; as a result, there may be a short-term supply shortage of sulfuric acid AN in the first half of 2021. In summary, the demand for AN sulfate is likely to increase slightly. Both domestically and internationally, the demand for AN sulfate remains stable or is on the rise, so supply is likely to increase somewhat as well. It is probable that the situation for AN sulfate in 2021 will be slightly better than in 2020: prices are likely to rise rather than fall. However, given the overall weak economic environment worldwide, price increases are not expected to be significant. For a detailed analysis, please refer to China Fertilizer Network’s annual report on AN sulfate. (Cheyan Hong)