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Urea prices will rise in spring; it depends on these three factors _ Author/Source: China Fertilizer Network Date: 2021-01-06 Clicks: 7. The price of urea in 2020 ended on a positive note, with increases that exceeded expectations during both spring and summer, and further rises in autumn and winter, resulting in high prices at the start of 2021. The question now is whether urea prices will continue to rise in spring Personally, I think it will rise, and it mainly depends on these three factors: First, demand during spring should be strong. It is said that during the spring, demand accounts for 60-70% of the total annual demand. In spring, both compound fertilizer manufacturers, power plants, and distributors should experience strong demand. In the last quarter of 2020, urea prices were high, so industrial customers likely did not stock up much urea; therefore, they will need to purchase more urea during spring ； It is worth noting that, thanks to various policy incentives, the area dedicated to growing crops in the north is expected to increase slightly. In the southern regions where it is possible to grow two or even three harvests of rice per year, farming activities are also set to resume. Some distributors have already started purchasing urea, while others have not yet done so; given this demand, urea prices are likely to rise in the spring. Second, exports will not be a hindrance either. After the last pricing decision was made, international urea prices did not drop; at most there were fluctuations. Although the new pricing decision will not be made until February or even the end of February, once clear information becomes available, China’s urea market can still take advantage of the situation to experience some price increases. Additionally, from January to November 2020, China’s total urea exports amounted to 4.87 million tons, up from 4.35 million tons in the same period of 2019. The increase was lower than expected, but it’s still better than nothing. Amid the pandemic, countries have placed greater emphasis on food supplies and on the import of fertilizers; therefore, it is likely that China’s urea export situation will be better in 2021 compared to 2020. In the spring of 2020, urea prices rose for nearly two months, yet exports performed poorly at that time. It is hoped that exports in the spring of 2021 will help to boost urea prices further. Third, the supply volume is on the rise, but it is still necessary to pay attention to whether transportation will lead to short-term supply shortages, especially regarding the arrival of urea in the northeast and southwest regions. After all, there are few urea manufacturers in these areas. It is also crucial to see whether urea production companies can resume operations in late January. If the supply of urea in a certain region fails to keep up with demand, urea prices could rise briefly, just as they did at the end of 2020. After talking about the positive aspects, let’s look at other factors. Even a small increase counts as an increase, and a brief rise is still considered an increase. Those of us in this industry need to be cautious about the potential negative effects that could arise if 9.98 million tons of state-held fertilizer enter the market. For example, if there is a situation similar to that during the Spring Festival in 2016, when large quantities of urea arrived on the market, then urea prices in certain areas might drop slightly. Another factor is that if urea manufacturers resume production in late January and rush to sell their products, that could also constitute a minor negative factor. Additionally, if fertilizer prices remain too high during spring, end-users might reduce their consumption. If it’s extremely cold in spring, sales may be concentrated, and even if urea prices rise, it won’t generate much profit for manufacturers. In short, the off-season in autumn and winter 2020 was not slow in terms of business activity, while spring 2021 is likely to be a peak season that does not reach its full potential. We shall wait and see what happens; it’s easy to see prices rise, but difficult to maintain those rises. We need to be cautious of situations where there are small increases followed by large drops, with few rises and many declines. (Che Yanhong)