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Urea rose by 120 yesterday, but will it fall after India’s bidding? Author/Source: China Fertilizer Network Date: 2021-03-23 Clicks: 10 On March 20, the ex-factory price of urea at a company in Inner Mongolia increased by 120 yuan per ton – what is going on? With the bidding deadline in India approaching on the 22nd, does this mean that there will be significant positive developments regarding those bids? As is well known, on the evening of March 13, RCF in India finally announced a new tender for the purchase of urea; the deadline for submitting bids was March 22, with the bid validity period extending until March 31, and the shipment date set for April 28. The timing of this tender is opportune: on the one hand, urea prices in our country have dropped significantly since early March, with the decline exceeding expectations; around March 12th, some urea producers in Shandong and Jiangsu began to raise their prices slightly on a tentative basis. On the other hand, India keeps a close eye on changes in urea prices in our country. Starting from April 1st, India temporarily abolished certain import tariffs, and the shipping schedule for this import tender takes advantage of this situation. Hence, in the past couple of days, there have been reports suggesting that India might win the bid for 1.5 million tons of urea. However, it is still too early to say that there are significant positive factors related to the Indian bidding process, and there are several underlying negative factors that need to be considered on the eve of the bidding in India. Firstly, the large inventory of urea available among domestic manufacturers seems to be the only factor driving price increases, with various positive factors possibly already having been exhausted in advance. The 120 yuan/ton increase in prices for urea producers in Inner Mongolia is based on a previous one-time drop of 210 yuan/ton on March 11th. Moreover, whether prices rise or fall in Inner Mongolia, they always happen slightly later than those seen in urea producers in Shandong, the two river regions, Jiangsu, Anhui and other places. Therefore, we should pay more attention to the trends among urea producers in Shandong, Jiangsu and other areas. Starting from the 18th, the upward trend in these regions has slowed down, as supplies at low prices from the early part of the month arrived in various markets. The current stalemate in urea prices is also due to the fact that most urea manufacturers have already arranged to supply 500,000–700,000 tons of urea to India well in advance, in order to avoid port congestion; it will now be necessary to wait and see how the bidding process in India unfolds before any new orders can be placed at the ports. Secondly, there is still uncertainty in the international situation, including in India. Out of India’s ten tenders, only one or two might manage to boost the price of urea in our country; the rest are simply opportunities for India to import more urea taking advantage of our lower prices. Additionally, in previous years India imported relatively small quantities during the first half of the year, so it’s possible that this time it will also only purchase a moderate amount before holding another tender. Even if 1.5 million tons are indeed purchased this time, given the one-month shipping time and the loading/unloading capacity of ports in our country, the impact on domestic urea prices will likely be limited. Looking at countries such as the United States, the situation in which 14 nitrogen fertilizer plants were shut down due to blizzards around early March has improved significantly; operations have resumed smoothly. On the 18th, the price of urea in the United States dropped to nearly $20 per ton. It is likely that when bidding takes place in India, the bid prices for urea from the Middle East will compete with those for Chinese urea as well. Once again, China’s current daily urea production is around 168,000 tons, and it has remained above 160,000 tons since mid-February – the highest level on record. Given that we are now in late spring, an oversupply is an inevitable outcome. As is customary, a daily production of 150,000 tons of urea, or at most 155,000 tons, is sufficient to meet China’s needs during the spring season. The current high production levels certainly deter potential buyers. Last spring, due to the pandemic, urea prices rose around April 10th; for a similar increase this year, it would be necessary for China’s crop cultivation area to increase by 10 million mu, and it would also be required to import more urea from abroad. In short, despite these underlying negative factors, spring demand accounts for 60-70% of the total annual demand. Whenever there are any positive developments in domestic demand or foreign trade, urea prices tend to rise. Urea manufacturers should take advantage of this situation and make appropriate moves. The first wave of price increases occurred in January and February, and it seems that the second wave of increases in mid-March is also coming to an end; it’s important to keep a close eye on exports as well. (Cheyan Hong)