Compound fertilizers: Production resumes, but shipments remain weak
Thread Content
This week, the upward trend in the prices of compound fertilizers continued to strengthen. Manufacturers increased their production levels, the market regained some vitality, dealers’ pessimistic attitude eased, and there was a greater willingness to make payments and arrange deliveries. However, due to the fact that local distributors have not yet taken action, the manufacturer’s revenue and shipments remain at lower levels compared to the same period in previous years. At present, the rise in prices of raw materials such as urea and ammonium chloride has not yet affected downstream markets, and the prices of compound fertilizers remain generally stable. In Jiangsu province, the ex-plant purchase price for 45% chloro-based compound fertilizers is 2200–2250 yuan; in Hubei province, it is 2400–2470 yuan for 45% sulfur-based compound fertilizers. The price with interest coverage is slightly higher. It is understood that, on the one hand, most compound fertilizer manufacturers purchased a batch of low-cost raw materials in the early stage; at present, there are not many transactions involving high-cost raw materials, so this has not had a significant impact on the prices of compound fertilizers. On the other hand, with the current average price increases of 100 yuan for urea and 50–60 yuan for ammonium chloride, the impact on the cost of compound fertilizers is also limited. However, industry experts predict that if the upward trend in raw material prices continues, there is still a possibility of further increases in the prices of compound fertilizers by the beginning of next year. Zhang Shengxia, head of the marketing department at Jiangsu Ruishi Market, believes that fertilizer manufacturers are currently increasing their production levels. As winter storage efforts progress, the inventory of nitrogen fertilizer raw materials is being used up faster, making further purchases of these raw materials inevitable. Especially in January and February next year, demand for high-nitrogen fertilizers will increase in regions such as Henan, Hebei, and Shandong, leading to a rise in the demand for nitrogen fertilizer raw materials. Moreover, urea prices have a significant impact on the cost of high-nitrogen compound fertilizers; it is possible that companies whose support policies are coming to an end will raise their export prices. Before the deadline, some manufacturers in Shandong and Anhui had raised their prices by around 20%. Although market conditions have stabilized, manufacturers’ shipment performance remains unsatisfactory. Recent information from the northeastern and southern markets indicates that, due to economic factors, local distributors have not taken action for the time being; as a result, larger wholesalers are facing financial constraints, and the volume of goods purchased for shipment is significantly low. On the farms in Keshan, Heilongjiang, corn is still being harvested in the fields these days. The main reasons for this are abnormal weather conditions and a limited supply of agricultural machinery; as a result, it is difficult to harvest the crops and turn them into cash, which directly affects farmers’ incomes. It also reduces the working capital available to distributors, and many district-level distributors have not started harvesting yet. Some fertilizer factories in Liaoning have resumed production, with some offering a starting price of 2,100 yuan per unit. According to local distributors, this has had a certain impact on confidence in the local market for compound fertilizers and ammonium phosphate. The South has returned to calm following a round of shipments last month. Fertilizer stockpiling for winter in Jiangxi is reaching its peak; low-priced products from local manufacturers are particularly popular. Local producers predict that there will be no significant peak season during this winter stockpiling period. Dealers in Guangdong and Guangxi have some fertilizer in stock, but the inventory levels are not high, and it is difficult to distribute it to lower-level outlets. (Jiao Peipei)
The operating rate of compound fertilizers increases slightly during this time of year; I wonder what the original poster thinks about this? What are the factors driving the increase in utilization rates?
Fertilizer-producing areas should supply goods to areas where fertilizer is consumed in large quantities or to distribution centers
The high operating rate of compound fertilizer manufacturers at present is mainly due to the following reasons: 1. Starting from October 20th each year, once the planting of winter wheat is completed, there are hardly any purchases by distributors by around November 20th. Manufacturers usually set October 31st as the settlement date for the year; during this period, sales staff return to the company to summarize the sales performance for the current year and formulate sales plans and policies for the following year. Of course, there are also adjustments to the staffing and sales regions. During this time, the production system undergoes its annual major overhaul, which includes maintenance of all equipment and anti-corrosion measures; most importantly, it involves the implementation of technical improvement projects to lay a solid foundation for production in the coming year. Usually, the maintenance work is basically completed by December 1st. To ensure normal staff attendance and maintain the workforce (after all, it’s difficult to find workers these days), the workshops start operating again one after another. This creates pressure in terms of inventory, after all, if there is no shipment for 1 month, then once the year-end review is completed, sales policies are finalized and the sales staff’s territories are adjusted, they head straight to the market to prepare for shipments for winter storage. 3. Before the Spring Festival, transportation capacity is quite limited, and it’s difficult to obtain train carriages for shipping. Winter storage usually involves shipments to the northeast, primarily by rail; in order to dispatch goods as quickly as possible and avoid the peak period during the Spring Festival travel rush, manufacturers have to concentrate their shipments at that time.