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Urea prices fluctuate without clear reasons; ammonium chloride simply waits to see what happens. Author/Source: China Fertilizer Network Date: 2021-01-06 Clicks: 2 At the beginning of the new year, urea remains a topic of discussion among fertilizers, but it’s not its price that draws attention; rather, it’s the production activities of urea manufacturers. These issues include restrictions on natural gas usage, environmental regulations limiting production, and the shift to producing liquid ammonia. At present, most urea production plants in the southwestern region have ceased operations, and the same is true in Inner Mongolia. Additionally, some urea plants in areas such as the Northeast, Henan, and Yunnan are undergoing maintenance or have switched to producing liquid ammonia or engaging in environmental protection activities. As a result, the overall operational rate of urea production plants across China is as low as 42.67%, leading to tight supply in many regions and frequent increases in prices. However, recently, due to environmental inspections in regions such as Shandong and Henan, production of compound fertilizers and other industrial products has declined, which has led to a slowdown in the sale of urea and a slight drop in its price compared to earlier periods ； In the southwest Yunnan-Guizhou market, as almost no urea arrives from outside the province, local brands hold a competitive advantage, leading to rising urea prices. As for the trend of urea prices at this time, whether they are rising or falling, it seems that companies have their own specific reasons for this. In any case, high-priced urea serves as one of the supports for ammonium chloride, a lesser-used nitrogen fertilizer. Currently, the ammonium chloride market in China is characterized by tight supply and stable prices, showing a favorable trend. Some companies need to control the number of orders they take on, while others, while handling existing orders, have also begun to accept new ones; however, so far there has been little change in prices. Currently, the mainstream ex-plant price for anhydrous ammonium in the East China region is around 550–580 yuan per ton ； In the Central China region, the standard export price for anhydrous ammonium is around 550–580 yuan per ton; companies take on orders in moderation, with very few orders coming from outside the region ； As the Spring Festival approaches, the trend in the price of ammonium chloride seems to be clearer as well. Firstly, the operation of caustic soda manufacturers is running at a low level due to factors such as environmental restrictions on production and insufficient raw material supply. Some ammonium chloride manufacturers in Henan Province are operating at a lower capacity. A few large factories in Jiangsu Province have seen a significant reduction in their production levels due to environmental inspections, while another factory in Shaanxi has stopped operations as a result of environmental regulations and has not resumed production. In the southwest region, some ammonium chloride manufacturers are still able to operate only at 50-60% of their capacity due to limited supplies of natural gas as raw material. Additionally, some companies in Chongqing and Yunnan Province have shifted their focus to liquid ammonia production; the capacity of these caustic soda production facilities is around 60%. According to statistics from China Fertilizer Network, the overall operational rate of caustic soda manufacturers is approximately 56%, with a daily production volume of around 30,000 tons. In addition, due to the cold weather, natural gas supply is expected to remain insufficient in the short term, and coal supply is also tight in certain areas. Coupled with high prices, these factors have limited the production capacity of some ammonium chloride manufacturers, with no sign of an immediate improvement in this situation. Secondly, ammonium chloride manufacturers have a sufficient amount of orders pending, but downstream buyers are cautious about placing new orders. Since the increase in ammonium chloride prices earlier on, a stable and cautious approach has been maintained; manufacturers in the industry are being careful with their pricing and order acceptance. Additionally, due to irregular reductions in production activities and stockpiling for off-peak periods, there are currently sufficient orders waiting to be processed at various ammonium chloride factories, with most of these orders able to be fulfilled by mid-month or around the Spring Festival. As a result, it is necessary to control order acceptance or to refrain from taking on new orders in the short term ； Meanwhile, some companies plan to raise the pricing of new orders slightly ； However, as the Spring Festival approaches, logistics and transportation activities will gradually decrease. At the same time, some small and medium-sized compound fertilizer manufacturers or enterprises that produce granulated ammonium chloride will reduce their production or even cease operations, which will lead to a reduction in the demand for ammonium chloride ； Additionally, traders are cautious when dealing with ammonium chloride; backed by existing orders, they place new orders only as needed. Once again, although urea prices saw slight fluctuations in some areas, they remained high overall, providing good support for ammonium chloride. Environmental inspections that lead to production restrictions, along with limited natural gas supply, have resulted in reduced operations by some urea manufacturers and downstream enterprises. It is therefore normal for urea prices to remain relatively stable. Based on feedback from urea manufacturers in the southwest region, there should be no significant increase in natural gas supply before the end of the month; as a result, the operating rates of these urea manufacturers are likely to remain low, which provides some support for prices. This is also beneficial for ammonium chloride. Overall, in the short term, the supply of ammonium chloride is limited while there are plenty of orders pending fulfillment; the overall trend is positive. Therefore, regarding the fluctuations in urea prices, ammonium chloride can be watched carefully, with prices likely to remain stable. It’s possible that after a period of calm, storms may arise, but stability in market conditions is still expected. (Tan Junying)