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The rise in urea prices has accelerated things. Author/Source: China Fertilizer. Date: June 7, 2021. Clicks: 6. The upward trend in urea prices continues unabated; since early May, urea prices have been rising steadily, and in some areas the price of urea has now reached over 2,700 yuan per ton (the same unit is used throughout). As of this Friday, the mainstream ex-factory price of urea in Shandong is 2,580 yuan. In Linyi, the purchase price of urea by compound fertilizer manufacturers is 2,550 yuan. In Hebei, the mainstream ex-factory price of urea ranges from 2,520 to 2,540 yuan, while in Henan it is 2,570 yuan. In Shanxi, the mainstream ex-factory price of urea is 2,500–2,510 yuan, with large-grained urea costing 2,500–2,520 yuan. During the weekend, the ex-plant price of urea in Jiangsu Province rose to around 2750 yuan, while the ex-plant price of urea in Xinjiang Province is also on the verge of reaching 2300 yuan. Currently, factory quotes are changing rapidly, with product discontinuations and price adjustments twice a day occurring frequently. Such sharp increases in urea prices have indeed been rare in recent years, and the main reasons for this are as follows: On one hand, the continuous rise in prices has led to an increase in panic among consumers. Although the demand for high-nitrogen fertilizers is relatively high during the summer, after June, downstream compound fertilizer manufacturers have slowed down their purchases of the raw material urea. The production of high-nitrogen fertilizers by most of these companies is actually coming to an end, so their demand for urea is not very high. However, after such continuous and significant price adjustments, some compound fertilizer manufacturers are becoming impatient. In addition, it has been learned from the market that some large compound fertilizer producers are establishing new factories in the Northeast. As is usual, the peak season for purchasing raw materials for winter storage falls in July and August. But due to the favorable domestic market conditions, the maintenance work that was scheduled for May has not taken place. Industry experts predict that urea manufacturers may increase the scale of their maintenance activities after July, which could affect the pace of purchases. As a result, some compound fertilizer manufacturers are making advance purchases, leading to some changes in the market supply and demand balance ； In the agricultural market, there will still be a demand for top-dressing in the future. Some traders sold goods on a short-term basis earlier on; in order to maintain their share of the market going forward, they began making purchases ahead of time. Even now, despite the availability of goods at lower prices, they prefer to hold back their supplies and avoid selling too much, in order to meet the orders already placed earlier ； After the price increased too rapidly, some traders who had bet on further price rises in the future also began to make purchases, and driven by demand in these three areas, the price of urea continued to rise. On the other hand, high production volumes and tight supply are facts. According to rough estimates by China Fertilizer Network, the actual production of urea in May exceeded 5 million tons, with an average daily production of over 160,000 tons – a relatively high level in recent years. Although there has been a slight decrease in daily urea production recently, it still remains at a level slightly below 160,000 tons. As mentioned earlier, demand for urea began to rise starting from early May, with a sudden increase in demand. After suffering losses due to short-selling activities, sellers were reluctant to sell their goods, which led to a surge in demand. As a result, there were relatively few low-priced supplies available on the market. In order to control the volume of orders they receive, urea manufacturers continued to raise prices, further increasing panic among downstream buyers. In this cycle, urea prices kept rising, and the amount of urea waiting to be sold by manufacturers continued to increase. Under these conditions, a daily production level of 160,000 tons is not particularly high; in fact, the amount of urea available for sale by factories is very limited, and it seems that prices are starting to get out of control. In summary, urea prices have reached new highs recently, and the market has turned into a seller’s market. Based on the orders that some companies currently have pending, there is little pressure to sell until mid-June, and prices are likely to continue rising. But it is still too early to start stockpiling in advance for the autumn or even winter markets at this stage. (Wu Wenchao)