Weekly Report on the Urea Market by the China Nitrogen Fertilizer Industry Association (December 21–December 27)

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Weekly Report on the Urea Market by the China Nitrogen Industry Association (December 21–December 27)
Author/Source: China Nitrogen Industry Association
Date: January 5, 2021
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Brief Analysis of the Domestic Urea Market for the Week
In terms of prices and market trends: The domestic urea market saw slight fluctuations. Gas-based producers continued to suspend operations on a large scale, while some coal-based producers completed maintenance and resumed production; thus, their operating rates increased slightly. Nevertheless, the overall supply remained at a low level. In the Southwest and the Two Hubei regions, supply remains tight. Downstream demand stays stable, and transaction activity is acceptable. Supported by rising raw coal prices, enterprises are inclined to maintain higher price levels. The urea market is expected to remain stable with fluctuations next week. As of now, the ex-factory prices in Shandong are 1,790–1,810 yuan per ton for small and medium-sized granules, and 1,860–1,980 yuan per ton for large granules ； In Henan, the ex-factory price for small granules is 1,800–1,860 yuan per ton ； The ex-works price for small-sized particles in Hebei is 1,820–1,840 yuan per ton. In terms of production, sales, and inventory: The survey data shows that this week, the output of small-particle urea reached 545,200 tons, a decrease of 2.16% from the previous week ； The output of large-particle urea reached 145,100 tons, a decrease of 10.66% month-on-month ； Sales of small-particle urea reached 630,000 tons, a month-on-month increase of 5.48 percentage points ； Sales of large-particle urea reached 147,700 tons, a decrease of 13.82% month-on-month ； The sales and production rate of small-particle urea reached 115.56%, up 8.37 percentage points month-on-month ； The production and sales rate of large-particle urea was 101.76%, a decrease of 3.74 percentage points month-on-month ； The total inventory amounted to 256,800 tons, a decrease of 17.56% month-on-month. Regarding plant operating rates: According to a survey conducted on December 29, 2020, the daily national production of urea was approximately 116,500 tons, with an overall operating rate of about 53.92%. Among them, the operating rate of urea producers using coal as raw material was 66.87%, while that of producers using natural gas or coke oven gas as raw material was 20.45%. The operating rate of urea producers nationwide increased by 1.66 percentage points compared to last week, but decreased by 4.07 percentage points year-on-year. Among them, the operating rate of coal-based producers rose by 2.33 percentage points week-on-week, yet fell by 1.57 percentage points year-on-year; meanwhile, the operating rate of gas-based producers dropped by 0.09 percentage points week-on-week and by 10.52 percentage points year-on-year. http://img.yf116.cn/image/img/20210105/113194146991.jpg In terms of raw materials: The domestic coal market is showing a steady upward trend. Coal mining areas are maintaining stable production levels. Demand has entered its peak season; market transactions are going well, and downstream buyers are quite active in purchasing. Overall, supply and demand in the market remain relatively balanced. Due to factors such as road traffic restrictions and limited railway transport capacity, prices are trending upward. Currently, the average ex-works price of mainstream anthracite is 961 yuan per ton. This price remains unchanged from last week, down 4.76% year-on-year, but up 3.78% compared to the same period last month ； The average incoming price of gasified bituminous coal was 764 yuan per ton, up 0.92% month-on-month, 6.41% year-on-year, and 3.95% higher than the same period last month ； It is expected that in the short term, the coal market will remain on a steady upward trend. Railways: Transportation is generally normal. Analysis of the situation of domestic urea producers for the week: According to a survey conducted on December 29, 2020, the daily output of urea nationwide was 116,500 tons. This represents a 3.17% increase compared to the same period last week, but a 10.06% decrease year-on-year ； Among them, coal-based enterprises produced 104,100 tons per day, a 3.62% increase compared to the same period last week, but a 5.51% decrease year-on-year ； The daily output of gas-fired enterprises reached 12,300 tons, a decrease of 0.42% compared to the same period last week and a drop of 36.08% year-on-year. Analysis of the sales performance of domestic urea producers this week: In terms of sales, this week’s production-to-sales ratio for urea was 112.66%, representing a month-on-month increase of 5.85 percentage points. Regions where sales increased significantly include Shaanxi, Hebei, Guizhou, and others. Regions where sales decreased noticeably include Sichuan, Xinjiang, Heilongjiang, and others. In terms of inventory: Based on the calculation that the production capacity of key enterprises surveyed accounts for 86.44% of the national total, the nationwide inventory stands at approximately 297,100 tons, a decrease of 63,400 tons month-on-month. This figure represents a reduction of 258,700 tons compared to the 555,800 tons in inventory held by urea producers as recorded by the association during the same period last year. The ex-factory price of small-particle urea rose month-on-month. The average ex-factory price stood at 1,759 yuan per ton, an increase of 6 yuan per ton compared to last week. This represents a month-on-month rise of 0.34% and a year-on-year increase of 6.80% ； The ex-factory price of large-particle urea rose month-on-month. The average ex-factory price stood at 1,856 yuan per ton, an increase of 44 yuan per ton compared to last week. This represents a month-on-month rise of 2.43% and a year-on-year increase of 11.74%. Trends in the international urea market: http://img.yf116.cn/image/img/20210105/1134384167850.jpg Due to limited supply in the east and strong demand in the west, the urea market has remained relatively robust at the end of this year. China’s production declined further, and exports also came to a halt. The spot supply in Southeast Asia remains uncertain in January; Saudi Arabia’s Safco 4 plant is likely to continue operating at reduced capacity until mid-January, which further restricts exports. The end-seasonal demand in Brazil has caused prices to surge rapidly to a high of $280 per short ton CFR. Egyptian producers continue to sell at low prices of as little as $280 per short ton FOB, while barge prices in the United States have risen once again. After an unprecedented year marked by a sharp drop in energy prices, stagnant production, and shrinking industrial demand, urea prices mostly ended higher. By 2020, FOB prices in the Middle East and Egypt were around $240 per ton, while barge prices in the United States approached $220 per ton. With seasonal demand picking up, traders are already releasing inventory, and the U.S. market will be a key focus in the first quarter. China: Affected by shutdowns of urea plants, the average daily urea output has dropped to less than 120,000 tons, the lowest level for the whole year. Apart from the high domestic prices, exports have also stagnated as a result. Egyptian producers maintain prices: Producers continue to sell at as low as $280 per short ton FOB, with support expected after the resumption of seasonal purchases at the beginning of next year.