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Sudden Rise in Urea Prices – Author/Source: China Fertilizer Network, Date: 2021-04-23, Clicks: 19. The sudden increase in urea prices is often unexpected; it is driven by speculation and inflated pricing for liquid ammonia, as well as domestic industrial demand. Overall, the domestic urea market has seen a rebound with prices rising across the board; according to some traders, the supply of spot goods is relatively tight. However, as some urea-producing enterprises that were under maintenance resume operations one after another, there is a trend toward an increase in overall industry activity, which leads to a certain rise in market supply. Meanwhile, agricultural demand provides limited support, so the expected overall price increase is modest ； In addition, the price of liquid ammonia in regions such as Hebei, Shandong, and Jiangsu has seen a slight increase, while it has dropped slightly in Hubei. Nevertheless, the overall price level of liquid ammonia remains high; the prevailing spot prices at major production areas in China range from 3100 to 3750 yuan per ton, which provides some support for urea prices. Recently, urea prices have risen by around 20-30 yuan per ton. For example, the standard ex-factory price of urea in Hebei is around 2100-2110 yuan per ton, while compound fertilizer manufacturers in Linyi, Shandong, have raised their purchase price for urea to 2200 yuan per ton. Wholesale prices in various local markets have also seen a slight increase. Before the release of the official figures, the price trend of urea attracts a lot of attention, and it is necessary to consider this from three aspects: its own supply and demand, as well as the impact of liquid ammonia. Firstly, there is the \"support\" provided by liquid ammonia: its price has remained relatively stable but is still at a high level. With the May Day holiday approaching, some downstream enterprises that use ammonia are likely to stock up on raw materials in advance, and ammonia producers will also rush to ship their products, which could lead to a slight increase in prices before the holiday or keep prices stable ； However, it is not ruled out that in certain areas such as the Two Lakes region, prices might drop slightly due to the resumption of operations by some liquid ammonia-producing enterprises undergoing maintenance; but the extent of this drop should be limited. Overall, prices are expected to remain high. In summary, it is feasible for enterprises to continue focusing their production on liquid ammonia. Secondly, the supply of urea is increasing, and the operation levels of enterprises are showing a slow recovery trend. According to statistics from China Fertilizer Network, as of now the overall operational rate of urea production enterprises is around 56.97%, with a daily production volume of approximately 159,900 tons ； Firstly, with the May Day holiday approaching, it is possible that some companies may shift their production focus back to urea in order to alleviate the supply pressure of liquid ammonia during the holiday period ； Secondly, some urea manufacturers that were undergoing planned maintenance or repairs due to temporary failures are gradually resuming operations or preparing to do so. Secondly, the industrial and agricultural demands for urea can complement each other. With the end of the spring market, agricultural demand for urea is weak; traders place only occasional orders. Summer demand has not yet emerged, and in some areas, price inversions still occur due to the circulation of previous inventory ； Large agrochemical suppliers are cautious with their purchases, placing orders as needed or carrying out transactions back-to-back ； However, industrial demand has been strong recently: firstly, the demand from plywood factories remains stable; secondly, there is little remaining of the low-cost raw materials used by compound fertilizer manufacturers in the earlier period, and the production schedule for summer fertilizers provides support, resulting in good purchasing volumes of urea at present ； Additionally, due to the impact of the pandemic in India, the timing of new tenders has been delayed; market reports suggest that they might be announced towards the end of the month. This raises the possibility of speculation ahead of these tenders, and a slight increase in prices is also intended as a precursor for future rises. However, given the low international prices, the increase in urea prices in our country should remain limited. Finally, the small amount of nitrogen fertilizer, ammonium chloride, affects urea to a certain extent. The ammonium chloride market is weak, with slight price drops or a modest reduction in transactions. Compared to urea, it has a clear price advantage, while compound fertilizers face greater cost pressures, resulting in slow sales and poor performance in terms of new price-based transactions. As a result, some compound fertilizer manufacturers prefer to use ammonium chloride as a substitute for part of the urea used in their products. The lower the price of ammonium chloride, the more significant the negative impact on urea prices. Overall, the high prices of liquid ammonia have contributed to this trend; the shift in the focus of urea production, the speculation that preceded the release of pricing information, and the need to purchase raw materials for the production of high-nitrogen compound fertilizers – all of these factors have driven up urea prices. However, due to the increasing production activity among urea manufacturers and the lack of support from agricultural demand, although the price trend is positive, the increase in prices remains limited. (Tan Junying)