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If the price of urea does not drop significantly by the end of March, it has remained at this high level for nearly half a year since October 2007. With spring plowing approaching, such high prices are clearly something that consumers and price regulation authorities do not want to see, and they also cause concern among most agricultural supplies providers. On the other hand, manufacturers are also concerned that during the peak fertilizer usage period in 2008, urea prices might repeat the situation seen in 2007 and drop to 1,500 yuan per ton If the high prices in the second half of 2007 were driven by exports, then… So, what drove the high prices at the beginning of 2008? During the spring plowing season in 2008, what will be the trend in urea prices? Rising energy prices drive up urea costs. In March of the Gregorian calendar, spring plowing has already begun in some areas of our country. In a little over twenty days, the main regions of our country will fully enter the spring plowing season. However, based on the performance in retail and wholesale markets, urea prices remain high with no sign of decline; the retail price of small-grained urea is around 1900, while the factory price stays at around 1700. Recently, two factors have the potential to influence the urea market. The first is tariffs, and the second is international price trends. March was the last month before the increase in export tariffs in 2008, and a 30% tariff rate was still in effect. Starting in April, the export tax rate on urea will be raised to 35%. While paying attention to these short-term factors, industry experts believe that, compared to supply-demand balance and short-term incentives, the long-term pressure of rising costs plays a more significant role in this wave of urea price increases. Dong Guoliang, deputy general manager of Hebei Gaocheng Fertilizer Factory, told reporters, “Within less than a month after the Spring Festival, the price of smokeless lump coal rose by 80 yuan per ton, and the supply was tight.” Manufacturing enterprises are under significant cost pressure. ” Rising raw material prices increase the production costs for enterprises, and this is not a problem unique to Gaocheng Fertilizer Plant alone. Yu Xianghua, sales director of Fujian Yongan Zhisheng Chemical Co., Ltd., said that due to rising coal prices, the cost of urea for some local companies has reached nearly 1,700 yuan per ton. Taking Pingdingshan Coal Industry Group Feiheng Chemical Co., Ltd. in the Central Plains region as another example, Wang Jiantong, the head of the company’s sales department, said that compared with the same period in 2007, coal prices have risen by 150 yuan, which has increased the cost of urea by 150 yuan per ton. While bearing the obvious increase in coal prices, manufacturing enterprises also have to deal with rising hidden costs, and the extent of these increases is significant as well. “Prices have risen, yet the quality of coal has declined – its moisture content has increased while its carbon content has decreased. This results in a lower yield of urea and hidden increases in costs. ”Wang Jiantong said. If the increases in electricity prices, labor costs, and environmental protection expenses are taken into account, urea manufacturers face even greater pressure to raise their costs. Industry insiders admit that, with costs difficult to reduce significantly, urea prices cannot drop sharply. Exports: Little progress expected in the near term. In 2007, exports of domestically produced urea surged, driving up domestic market prices throughout the second half of the year. Reports from journalists show that most industry insiders are not optimistic about export trade in the first half of 2008. Exports will not drive up urea prices this spring. Qingdao HuiChuan Import and Export Co., Ltd. is a well-known domestic exporter of urea. Ding Yunjing, the company’s business manager, believes that \"low prices of urea in the international market, weak demand, and rising export tariffs in China are the three factors that restrict China’s urea exports.\" ” In international trade over the past few years, the major demand for China’s urea has come from neighboring India. However, procurement orders in India generally come in the second half of the year, with little activity usually in the first half. In the second half of 2007, India had already purchased a large amount of urea, and it will be difficult to issue further purchase orders in the near future. Currently, the main export destinations for urea in China are countries such as Bangladesh and Sri Lanka; not only are the number of orders low, but the total volume exported is also small. It is estimated that in March, China’s total exports of urea were not high, ranging from 200,000 to 300,000 tons. On the other hand, falling international urea prices and high export tax rates have also restricted China’s urea exports. Currently, the FOB price for the export of small-grained urea from mainland China is $310–$315 per ton, while taking into account tariffs, customs clearance costs, and purchase prices, the actual cost of exporting urea could reach $375. In April, the export tax rate on urea will be raised to 35%, further increasing export costs. At the same time, April and May are the off-season for the international market, so the possibility of further price increases in the international market is low. A business manager from another well-known multinational trading company also told reporters that although domestic companies have cost advantages, taking into account tariffs and international demand factors, unless anything unexpected happens, China’s urea exports will remain stable in the near term with little progress to be made. Most predictions: Stable prices at high levels. As for future price trends, most industry experts believe that urea prices will remain stable at high levels in the spring of 2008, and the era of low urea prices seen in 2007 is unlikely to recur. Tang Guisheng is the deputy general manager of Anhui HuiLong Agrochemicals Group Co., Ltd., as well as the director of the group’s nitrogen fertilizer business. Speaking of the trend in nitrogen fertilizer prices this spring, he summarized his view in one sentence: “Stable at high levels.” Tang Guisheng believes that the consequences of the high-volume export of urea in 2007 will become evident at the beginning of the spring planting season. Overall, domestic manufacturers and distributors have low inventory levels. Tang Guisheng estimates that during the peak season for fertilizer use in spring, the retail price of small-grain urea is around 1,800 yuan, and the situation is not optimistic. At present, there has been no widespread selling in Shandong Province, the major province for fertilizer production, so a significant drop in prices is unlikely. On the other hand, due to the demand for producing BB fertilizer, large-grained urea may continue to maintain high prices. Wang Jiantong said that the retail price of urea in Henan has reached 2,000 yuan per ton. It is estimated that during the peak season, the retail price in Guangdong, Guangxi, and Fujian provinces could reach 1,950 yuan, while in Henan province it is around 1,800 yuan. Yu Xianghua believes that urea prices will see a slight decline in the coming period. However, the ex-factory price of urea will not drop to 1,600 yuan per ton; it is likely to fluctuate around the maximum level permitted by policy, and in Fujian province it could reach 1,800 yuan per ton. Dong Guoliang believes that if **no intervention is made, prices in certain areas will be very high. However, overall, domestic urea prices are expected to decline slightly. It is reported that currently, the actual factory price for most local enterprises is around 1,850. Regional supply and demand: The driving force behind the market. It is generally believed that exports were high in 2007, with production and distribution companies having little excess inventory; coupled with rising costs, this has led to currently high prices for urea. However, China has a large urea production capacity, and once production is ramped up, market supply can be restored immediately. Based on the views of various interviewees, urea prices are expected to decline slightly. Amid the volatile prices of urea, which region will be the first to drive down prices? Become the first card to trigger a domino effect? Northeast, North China, South China, Southwest, Southeast, or Central China? A concern is that there are signs of drought in the Northeast region this year, which will have a negative impact on the demand for fertilizers in spring. A business manager at a well-known company in Heilongjiang Province believes that the situation for urea in that region is not very optimistic; there is an excess supply of urea, so price cuts and leftover stock are almost inevitable. On the other hand, in Shandong Province, a major province for urea production, manufacturing enterprises are not facing inventory pressures, so there is no possibility of mass sales at low prices in the short term. Liu Zhengjun, manager of the nitrogen fertilizer division at the sales company of Shandong Lianmeng Chemical Group, confirmed that Shandong Lianmeng is operating normally at present and continues to produce as usual despite the freezing conditions in the south. However, there is a high demand far exceeding supply; 50,000 tons of orders need to be produced and shipped as soon as possible. Industry veterans believe that this year, the factor that will determine the trend in urea prices is likely to shift from Shandong Province, a major fertilizer-producing region in the North China Plain, to Heilongjiang Province in the Songnen Plain of the Northeast.