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It was said in the urea group that the price would increase by 200-300, but what’s the truth? Author/Source: China Fertilizer Network Date: 2020-06-01 Clicks: 7 These past couple of days, a customer showed me a screenshot of a urea-related group, where some people said that the price of urea was going to rise by 200-300! Is urea really set for another round of price increases? Who gave the courage to raise the price of urea? What’s the truth? Let’s first consider who might have the courage to raise urea prices by 200-300. Internationally, India is set to launch new procurement tenders, with the date possibly moving up from mid-June as initially rumored to June 5th. International urea prices have also begun to rise in an intermittent manner; perhaps this is because the low-priced stock has finally been sold out, resulting in less sales pressure on various suppliers. Another positive factor is that, as is well known, since early May, the offshore price of urea in our country has been detached from international prices; in other words, it is much higher than the prices of urea in other countries. For example, the price is around 230–235 USD/ton offshore in China, while it’s only 210–215 USD/ton offshore in the Middle East; the shipping cost from both regions to India is roughly the same. In terms of domestic trade, the production by compound fertilizer manufacturers has not yet come to an end in the summer, and there is still a need for additional stockpiling. The same situation holds true for power plants and plywood factories, with some sporadic demand as well. Perhaps the greatest courage is required when it comes to applying topdressing to rice and corn in the Central Plains region; one or two applications of topdressing are necessary, and there is a certain demand for urea. After all this discussion, some people might say that the maintenance plans of urea manufacturers in June should be the top priority. But according to Xiao Che from China Fertilizer Network, this isn’t really a big deal. Although the operating rate of urea production facilities was a bit higher in June over the past years, the daily production volume was not very different from that of the same period this year; therefore, the positive impact on supply isn’t that significant. What really needs to be addressed is the mindset of the manufacturers. What started as a rise in prices driven by manufacturers and large traders has turned into what appears to be a genuine increase in prices. Smaller and medium-sized distributors seem unable to remain calm; the reason for the 200-300 increase in prices within this urea group might lie in this very fact. It’s not scary if prices rise for a short period of time, as people can still remain calm and make sensible decisions regarding their purchases. What’s scary is when prices keep rising for a long time, especially when this situation contradicts the expectations of almost 90% of people. Over the past half month, from May 13th to the present, the purchase price of urea in the Linyi market has risen slowly from 1,620 yuan per ton to 1,680 yuan per ton. The ex-factory price of urea produced by manufacturers in Shandong has increased from 1,560 yuan per ton to 1,650 yuan per ton; those manufacturers whose prices are lower than this level are also seeing increases in their prices. In other regions as well, urea manufacturer prices have risen by amounts ranging from 20 to 60 yuan per ton, and these price increases are quite concerning. Other factors that cause concern include: the operating rates of compound fertilizer manufacturers have first dropped significantly and then further declined, with the current rate being around 50% only. Power plants have also nearly completed their preparations for desulfurization and denitrification during the summer. Plywood factories have not made any significant purchases. In the past two weeks, the wholesale prices of urea in Guangdong and Guangxi, as well as in regions such as Jiangsu, are lower than the factory’s export prices. It seems as though all of this is saying that if urea is about to see another round of price increases, we dealers will have reason to cry – on one hand, the orders placed earlier have not yet arrived, and on the other hand, we are hesitant about whether to proceed with purchasing goods at such high prices. In summary, what needs the most attention at present is whether there will be a sell-off once the low-priced and high-priced products arrive in various target markets. If not, then urea prices may continue to rise before experiencing a slight decline ； If there is indeed a situation of dumping inventory, or if urea has to be sold taking advantage of the last peak selling season in summer due to an influx of supply, urea prices are likely to drop sharply. We have the courage to raise prices by 200-300, but the consequence of such a rise is that those whose goods cannot be sold will suffer losses. Even in the worst-case scenario, if urea prices do rise by 200-300 this summer, it might not be advisable to purchase large quantities at this stage. After all, when urea becomes available for sale in the market during the second half of June, it will have to compete with high-nitrogen compound fertilizers, extruded granulated ammonium sulfate, ammonium chloride, and other products; it’s difficult to predict who will emerge as the winner in such a situation. (Cheyan Hong)