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With the demand for urea meeting its basic needs, will its price drop sharply? Author/Source: China Fertilizer Network Date: 2021-06-15 Clicks: 13 As is well known, the price of urea has continued to rise steadily, reaching extremely high levels. Taking Shandong as an example, the ex-factory price increased by over 200 yuan per ton starting from May 11th, reaching nearly 2,400 yuan per ton by the end of May. Since early June, this price has further risen to a peak of 2,710–2,730 yuan per ton; during this period, several factories stopped providing pricing information ； Since June 7, the price has fallen, then risen, and dropped again. By mid-June, summer corn planting began in Shandong’s two river regions as well as in Jiangsu, Anhui, and Hubei provinces. The demand for such corn had essentially come to an end, and urea prices started to drop. So, will prices fall significantly? Generally speaking, there won’t be a sharp drop; it depends on the printing and labeling situation as well as the inventory levels in the grassroots market. On the one hand, domestic demand has not completely vanished. Although it is the planting season for summer corn in regions such as Shandong, distributors have been cautious about purchasing goods so far, believing that there will still be a slight shortage of urea ； Fertilizer supplies for the northeast, northwest, and west are still available; it’s just that people hesitate to purchase urea at high prices ； In particular, the price of urea in spring is much higher than last year, and it rose even further in summer. A few distributors may deliberately stock up goods to drive up prices, while most distributors likely have very little inventory left. Considering factors such as excessive dollar issuance and inflation, it is highly likely that urea prices will not drop significantly in the future. In the industrial sector, plywood factories will continue to use urea for now; after all, as the country with the best pandemic control measures in the world, these factories are likely to see higher export and domestic sales volumes compared to the same period last year, which naturally leads to an increase in their demand for urea ； Although the power plants have prepared some urea in preparation for the peak electricity demand during summer, given the exorbitant prices of urea, urea suppliers will be ready to supply more urea whenever the power plants issue tenders ； The production of autumn fertilizers by compound fertilizer manufacturers is likely to be advanced somewhat, mainly due to concerns that urea prices will not drop much at the end of summer before rising again. After all, there is a large volume of urea exports from our country, and with the labeling process approaching, speculation regarding prices is high, and such speculation can be exploited at any time. Next, urea prices will fall – either by a small amount for a short period, or by more over a longer period. On the other hand, exports, especially those from India and Pakistan, have repeatedly disrupted the upward price trend in China’s urea market. In terms of exports, from January to April, China’s urea exports reached 1.342 million tons, representing a 49% increase compared to 898,000 tons in the same period last year. Although these 134,000+ tons may seem like a small amount, given that the demand for urea during spring accounts for a large portion of the total annual demand, and considering that there are many maintenance periods for urea production plants during summer, these exports, combined with the fact that the dates for setting prices were earlier than in previous years, contribute to higher price levels. It seems there is always a reason behind any increase in urea prices. The tender for June’s first half – well, given that only 565,000 tons were awarded in the tender that concluded on May 25 – this result was within expectations. It can be said that if it hadn’t been announced earlier that the tender might take place on June 8-9 at any time, the official start of a decline in urea prices would likely have come sooner. Speculations regarding this pricing in India include that, given the proximity of the deadline, the prices will be high; the price could be over 430$ on a CIF basis for China (over 2600$ at the manufacturer’s price in Shandong), with the latest estimated CIF price for India being above 470$. Since the shipment is expected to take place on July 23rd or 24th, the long lead time means it won’t have a significant impact on the price of urea in our country. In other words, this pricing in India can only serve to support the current decline in urea prices in our country. In short, the country’s social inventory of urea is likely to be low, with new pricing to be announced soon. As demand from industry and agriculture declines during the summer, the daily production of urea has been increasing gradually and is set to reach high levels (nearly 170,000 tons per day). Given factors such as fluctuations in shipping costs and long shipping times, it remains uncertain to what extent the new pricing will be influenced by these conditions. Urea prices are expected to decline somewhat before large-scale demand emerges in autumn; initially, it is estimated that the drop will not be significant compared to the sharp rise seen during the summer. (Che Yanhong)