Summary of urea market conditions across China in May 2016

Urea sees slight drop but overall upward trend remains; Author/Source: China Agri-Media; Date: 2016-05-03; Clicks: 2. Factories have stopped manipulating urea prices, with fluctuations continuing. Since late April, the upward trend in domestic urea prices has shown some signs of weakening. A large part of the factors that have halted price increases stem from the temporary exhaustion of positive market factors or excessive speculation regarding electricity price adjustments; nevertheless, it can still be regarded as a process of gradual price hikes through fluctuations. Of course, looking back, such actions could only have taken place on the premise of large-scale maintenance, production cuts, and shift in production activities by domestic urea manufacturers in March and April this year. By ensuring a slight shortage in market supply and demand, it is natural for prices to continue rising. During this period, there were indeed some industry insiders who expressed bearish views; there were even dealers who bet against the April market trend. In the end, most of them had to pay the price for their short-sighted predictions. It is believed that the alternating fluctuations in urea prices this time still present both opportunities and challenges for manufacturers in the industry. 　　The industry directly expresses expectations for another price increase in urea. Facing the upcoming decline in prices, the industry holds mixed feelings. It is speculated that the factory has nearly completed its prior contracts, and there is a lack of new orders; after some bargaining, distributors have finally seen another round of price cuts on urea as a promotional measure. However, the expected extent of price drops is not clear; aside from the fact that the policy regarding electricity price adjustments has lost its impact, there is uncertainty in all other aspects that could provide support. For now, numerous urea producers in China have scheduled routine maintenance, and the weak market supply has directly led to a tightening of supply and demand. As I stated last week: although the demand for summer fertilizers in the agricultural sector has been delayed and industrial demand remains limited, with no overall increase in domestic demand, from a supply perspective, the decline in urea production has also contributed to tighter supply and rising prices. At present, without considering whether industrial demand will continue to rise in the near term or making any assumptions about tenders in India, merely analyzing market supply and demand is already enough to give dealers who are looking for opportunities to buy at low prices a lot of headache. From conversations with several industry peers, it is clear that there are concerns, or rather, a sense of uncertainty, in the market. Guided by the market principle that \"supply and demand determine prices,\" it is reasonable to believe that urea will have room for further increases after a short-term price drop; however, it is difficult to determine the bottom price, as there is also a fear of competitors getting there first. Once someone buys first, the factory will surely take the opportunity to raise prices, and the chance to buy at a low price passes in an instant. Furthermore, dealers generally agree that there is a lack of inventory in both factories and the downstream markets; this situation not only prompts factories to stock up goods and raise prices but also encourages dealers to make bulk purchases. After all, the new fertilizer application season is approaching, and expectations of another price increase for urea have already emerged. 　　The bidding process in India might turn out to be a futile effort. This year’s urea bidding process in India has piqued great interest, but rumors that Indian buyers are interested in a price of $220 per ton CIF have disappointed half of the domestic manufacturers. After all, with a CIF price of $220 per ton, a conservative estimate suggests that the FOB price in China would be no more than $210 per ton; the corresponding price for urea at the port of delivery is only 1,210 yuan per ton, which is clearly far from the current domestic sales prices. Of course, some domestic traders are bidding at 215–220 dollars per ton FOB, based on the 215 dollars per ton figure from Taiwan’s most recent tender, which clearly reflects a bearish attitude. In fact, looking at urea imports and exports in the first quarter of 2016, some domestic manufacturers were indeed engaged in unprofitable trade activities. According to customs data, China’s total urea exports from January to March amounted to approximately 2.96 million tons, with exports in March alone reaching 907,600 tons, a 42.5% increase on a month-on-month basis. Surely among them are those we mentioned earlier as the \"short-sellers who tried to stand out\", those who found themselves in a difficult situation in the early stages of port operations, and also those who took the opportunity to profit from the chaos. In short, although urea exports involve slim profits or even losses, there are always buyers willing to pay seemingly absurd prices, which surprises the industry; it is believed that the recent bidding process in India is no exception. 　　In summary, although the domestic urea market has shown signs of a slowdown after previous price increases, the overall supply-demand balance remains tight. Numerous favorable factors can still be regarded as support for the market in the future. India’s low-price bidding is disconnected from domestic sales, so there is no need for reference at present. The domestic summer fertilizer application season is approaching, and both factories and the downstream market have relatively low urea inventories. The industry seems to be anticipating another round of price increases in early May.

Urea prices see a slight decline; summer market remains promising. Author/Source: China Agri-Media. Date: 2016-05-03. Clicks: 2. Prices experience temporary drops. At the end of April, the urea market was affected by the cancellation of electricity price discounts, which led to a significant increase in production costs for companies; however, factory prices did not rise instead showing a clear decline. 　　Zhang Mingjie from Anyang Zhongying Fertilizer Co., Ltd. told reporters, “We are now in the off-season for fertilizer use. The price of urea has dropped by 20 yuan per ton recently, to 1,380 yuan per ton. Although the cancellation of electricity price discounts has a significant impact on the company’s costs, it is generally within expectations.” Currently, demand in the agricultural sector is weak, and the growth rate of demand in the industrial sector has also slowed down. Coupled with the unsatisfactory bidding situation in India recently, prices have declined. ” 　　Li Baoquan, manager of the nitrogen fertilizer sales department at Shandong Liaocheng Luxi Chemical Group Co., Ltd., said that the current decline in urea prices is a temporary fluctuation. “The demand in the agricultural market has basically come to an end. Previously, demand from industrial compound fertilizer manufacturers drove up urea prices; however, as demand from these manufacturers has declined recently, urea prices have dropped by a certain amount. Currently, the main ex-factory price in Shandong region is 1,350 yuan per ton, a decrease of 50 yuan per ton compared to before, and this decline is within expectations. ”Li Baoquan explained that the removal of electricity price discounts has led to a significant increase in costs for manufacturing enterprises. However, in Shandong province at present, the operational rate of these enterprises remains high, at 80%-90%. 　　In fact, the urea market in April was quite promising: although agricultural demand grew more slowly, industrial demand stepped in to fill the gap, resulting in relatively ample orders for manufacturers. Coupled with the positive impact of rising electricity prices, the market conditions were excellent. Although prices saw some adjustments at the end of the month, there was no sense of pessimism in the market. On the contrary, after prolonged fluctuations, manufacturers are now relatively rational regarding price changes. 　　Tenders have had limited impact on the market. Although exports have always been regarded as a key factor in alleviating domestic inventory pressures and serve as an indicator of market trends, since 2016, tenders in India have remained unresolved. This is due, on one hand, to the reduction of fertilizer subsidies within India, and on the other hand, to price negotiations. It is understood that although the winning bid price for the first procurement tender in India in 2016 was announced in a veiled manner, a price of less than 220 dollars per ton clearly would not attract the interest of domestic companies; the price corresponding to this amount for urea at the port was only around 1,200 yuan per ton, which is far below the domestic market price. 　　In this regard, Li Baoquan believes that due to the strong demand in the domestic market during the first quarter, companies have focused their efforts on the domestic market. The bidding prices in India for this new round are significantly lower than those in the domestic market, so domestic traders are likely to be less involved. The main reason for the decline in urea prices this time is the reduction in short-term demand; although the news regarding the bidding in India has an impact on the market, it is limited in extent. “Judging from the various tenders held in 2015, there has been an increase in the willingness of domestic companies to cooperate with one another; faced with price pressures from foreign competitors, domestic companies are not able to sell their products at low prices. Domestic market demand is expected to improve in May, so companies will not choose longer routes just to avoid shorter ones. ” 　　Zhang Mingjie also believes that the bidding prices in India are significantly lower than domestic market prices. In the short term, this seems to be negative for the market; however, if domestic companies do not participate actively, the actual impact on the market will be minimal. “India’s bidding prices are actually within expectations; since the price of urea in the domestic market is currently low, there is good acceptance for it, so companies will continue to focus on the domestic market. ” 　　There may still be opportunities in the market in May. This year, the urea market has seen a peak season that has not been seen for a long time; although urea prices are currently falling, the market is not pessimistic and is rather optimistic about the situation during the summer. 　　Li Baoquan believes that the current decline in urea prices is a temporary adjustment; as the summer planting season approaches, urea prices will start to rise again, and by May they may return to around 1,400 yuan per ton. He analyzed, \"The demand for urea is high during the summer fertilization period in June. It is expected that dealers will start stocking up on fertilizers in mid-May. Since many dealers missed out on the spring market opportunity and their current inventory levels are relatively low, the market situation in May is worth looking forward to.\" From the supply side, May is a traditional period for maintenance work, and many companies schedule maintenance activities during this time, which will also have a positive impact on the market. ” 　　The cancellation of the electricity price discount did not lead to an increase in urea prices; although this was expected, it still represents a potential positive factor. Li Baoquan believes that with the elimination of electricity price discounts, the costs for traditional urea manufacturers will increase by nearly 100 yuan per ton. This means that many energy-intensive companies may not be able to bear such costs and will be forced to suspend production or withdraw from the market. This, in turn, will accelerate the reduction of overcapacity, providing support for the market and contributing to the stable development of the industry – which is beneficial for its growth. 　　Zhang Mingjie also said that although urea prices dropped at the end of April, as the fertilizer usage season approaches, both agricultural and industrial demand is promising. It is expected that after two weeks of adjustment, urea prices may rise again after mid-May; however, due to the relatively ample overall supply in the country, the increase will not be very significant.

Urea prices stabilize during holiday, with slight local declines Author/Source: China Business Network Date: 2016-05-04 Clicks: 12 On May 3, during the May Day holiday, the domestic urea market was generally weak, with slight price drops in some areas. Factories cutting prices to attract customers has created a competitive atmosphere in the market. Dealers purchase cautiously, feeling somewhat helpless regarding the practice of buying on dips. It is also understood that maintenance work by enterprises in major urea-producing regions such as Henan, Hebei, Shanxi, and Shandong remains inevitable. There has been no surplus in short-term market supply and demand. Currently, the price for low-end products exported from Shanxi has dropped to 1,250 yuan per ton ； Low-end export price in Henan: 1,300 yuan per ton ； The domestic price in Hebei has dropped to 1,280 yuan per ton; some traders have inquired about prices ； Regarding the price cuts in Shandong, the factories are somewhat in a passive position. In India’s first round of tenders, 690,000 tons have been sold, of which 180,000–200,000 tons is likely to come from China, mostly being stock that has been in ports for about half a year. There is still a possibility of further tenders in India in the near future. Domestically, the demand for high-nitrogen industrial fertilizers has increased slightly, while purchases in the rubber sheet industry remain stable. Short-term domestic prices are expected to remain stable. 　　Today’s market conditions for urea in certain regions: Urea producers in Shandong are offering prices of 1320–1360 yuan per ton, with prices remaining stable; prices for agricultural use are 1310–1340 yuan per ton. Local sales are average, with some products shipped externally. Industrial compound fertilizer manufacturers within the province are stockpiling an appropriate amount of high-nitrogen fertilizers for later use; the purchase price in Linyi is around 1,370 yuan per ton. The port side is in a negative mood, and cargo collection has temporarily come to a halt. 　　The ex-factory price of small-particle urea in Hebei is 1,280-1,300 yuan per ton, with transactions also taking place at 1,280-1,300 yuan per ton. Purchases are mainly by enterprises in the industrial compound fertilizer and rubber sheet sectors; the agricultural market is currently weak. The wholesale price within the province is 1,330 yuan per ton, with moderate sales volume. 　　Urea prices in Henan have seen slight fluctuations; the price for small-grained urea is 1,360–1,380 yuan per ton. Demand from downstream sectors is moderate, resulting in limited new orders. In the agricultural sector within the province, the price is 1,340–1,360 yuan per ton, while industrial use of compound fertilizers requires a price of 1,340 yuan per ton. The manufacturer’s ex-plant price is 1,300 yuan per ton. 　　The price at the stations in Shanxi for small-grained urea is 1,280 yuan per ton, with prices remaining stable for now; the price for large-grained urea at these stations is 1,320 yuan per ton. Overall, sales are mainly outsourced; low-end transactions are priced at 1,250–1,280 yuan per ton ； Domestic sales are average; the price for local sales is 1,280 yuan per ton, and the price is negotiable. 　　The urea market in Jiangsu remains stable; mainstream quotes from enterprises in southern Jiangsu are 1,450 yuan per ton, with actual transaction prices subject to negotiation ； The price in northern Jiangsu is 1,430 yuan per ton. The situation regarding shipments to other areas is average; demand within the province is somewhat weak, with some shipments going to external destinations. 　　Urea prices in Liaoning remain stable for now; market sales are average. Demand from the agricultural sector remains uncertain at present. The ex-plant price for small-grain urea is 1,380 yuan per ton by road transport, and 1,450 yuan per ton by truck. The arrival volume of urea from other provinces is moderate, with the price at the port being 1450–1480 yuan per ton.

Urea price trends across China Author/Source: China Fertilizer Network Date: 2016-05-04 Clicks: 10 Sales in the urea market are moving slowly, and new orders are weak; since the holidays, urea prices have continued to fall in most regions. Industrial demand in the Shandong region is currently weak; new orders for urea manufacturers are average, and the prevailing ex-plant prices have dropped by 20 yuan per ton, to 1310–1320 yuan. It is reported that the price at delivery in Linyi is 1360 yuan ； Urea manufacturers in Hebei Province mainly sell their products through port shipments and local sales; however, the number of ports from which shipments are made is limited. The standard Out of factory prices have dropped by 10 yuan, to between 1300 and 1360 yuan, while there is still little demand for high-end products ； Manufacturers in the Henan region are mainly handling existing orders, and there are few new industrial orders. Currently, the standard export prices have dropped by 10–20 yuan, to between 1340 and 1360 yuan ； In the Shanxi region, the sales of compound fertilizers to external markets have been sluggish; most sales are confined to the local market. Manufacturers are facing some difficulties in distributing their products. The prevailing ex-factory price has dropped back to around 1,280 yuan. Even manufacturers quoting prices above 1,300 yuan also intend to lower their prices ； Anhui manufacturers have few orders left to fulfill; the standard export prices have dropped to 1380–1420 yuan, while sales of high-end products are poor ； The main factory prices for urea in Jiangsu have dropped by 10–20 yuan, to 1440–1450 yuan ； The market conditions in the northwest, southwest, and northeast are generally stable,... (the omitted parts can be found in the member area; the same applies below). Internationally, …… Overall, the volume of Chinese goods involved in Indian tenders remains relatively low, exerting minimal impact on the domestic market. Industrial demand is currently weak, and agricultural demand in regions such as Central and Southern China has not yet picked up. It is expected that there may still be some room for prices to decline until mid-May. After that, a new wave of purchases by industrial plywood manufacturers, as well as the need for raw materials in summer fertilizer production and for base fertilizers for crops like rice and corn, will drive demand upward. At that time, urea prices are likely to see a slight increase. 　　Regional market prices: Unit: yuan/ton (bold numbers in the table refer to large-grain urea) http://www.nmtech.com.cn/sys/sec_zxwz.jpg

Slight increase in wholesale and retail prices of urea Author/Source: Date: 2016-05-04 Clicks: 2 http://www.nzdb.com.cn/Portals/article/1447/201605/32_20160504100516_x5ppi.png Last week (April 25–April 29), the wholesale and retail prices of urea in China saw a slight increase. On May 2, China’s urea wholesale price index (CNPI) was 1,506.42 points, up 11.44 points on a month-on-month basis, representing a increase of 0.76% ； A decrease of 217.74 points on a year-on-year basis, representing a decline of 12.63% ； It dropped by 356.83 points from the base period, representing a decline of 19.15%. China’s urea retail price index (CNRI) stood at 1,598.32 points, up 12.37 points on a month-on-month basis, representing a growth rate of 0.78% ； Compared to the same period last year, it decreased by 193.18 points, a drop of 10.78% ； It dropped by 306.64 points from the base period, representing a decline of 16.10%. 　　http://www.nzdb.com.cn/Portals/article/1447/201605/32_20160504100541_oi0rp.png Supply situation: The operating rate of domestic urea manufacturers remains around 73%, while that of enterprises using gas as a raw material is around 60% ； From the perspective of the raw material market, the anthracite market is operating steadily, with moderate demand from downstream industries; prices are expected to remain stable in the short term. 　　Demand situation: Demand for agricultural fertilizers in the domestic market is weakening, with reduced transactions ； The demand for urea from industrial compound fertilizer plants is decreasing ； The situation regarding goods gathering at the port is not ideal. 　　International market: In the international urea market, prices of small-grained urea in key regions showed mixed trends. Specifically, the FOB price of small-grained urea in the Baltic Sea increased by $3 compared to the previous week, remaining at 203–205 dollars per ton ； The FOB prices for small-grained urea in the Black Sea dropped by $2/ton at the lower end compared to the previous week, while the prices at the higher end increased by $3/ton, remaining at 202–208 dollars/ton ； The FOB price of small-grained urea in China dropped by 2–3 dollars per ton compared to the previous week, remaining at 217–220 dollars per ton. On the export side, India’s urea tender concluded last week; the lowest bid amounted to $217 per ton on a FOB China basis. This price was lower than what domestic companies had expected, which led to resistance against those bids. China secured only 90,000–120,000 tons in orders, while the Arabian Gulf and Iran obtained around 190,000 tons and 240,000 tons respectively. 　　Situation in various regions: Last week, prices in certain areas of the domestic urea market showed both increases and decreases. In regions such as Heilongjiang, Anhui, Shandong, Hubei, Guangdong, Guangxi, Shaanxi, and Gansu, the wholesale and retail prices of urea increased by 15–80 yuan per ton ； In Hebei, Liaoning, Jiangsu, Fujian, Jiangxi, Henan, Sichuan, and Yunnan, the wholesale and retail prices of urea dropped by 10–50 yuan per ton, while prices remained stable in the other regions. 　　Recently, the electricity prices for domestic fertilizer manufacturers have increased; some of these companies have raised the prices of urea, yet actual sales performance has been poor, with prices at the higher end continuing to fall. Affected by factors such as a decline in domestic industrial and agricultural demand and a pessimistic outlook in international markets, urea prices are expected to fall in the short term.

Elimination of electricity price discounts may lead to rising urea prices. Author/Source: China Agri-Materials. Date: 2016-05-04. Clicks: 39. Guest of this issue: Guo Chuanzhi, General Manager of the Qingdao branch of Bonglida Agri-Materials Chain Co., Ltd. Guest’s views: After reaching a bottom after 1–2 years, urea has little room for further decline. Under heavy market pressure, it is expected that the prices in the next round of tenders in India will return to a reasonable level. The cancellation of the preferential electricity pricing policy will accelerate the phasing out of outdated production capacity, which is beneficial for the future development of the industry. Currently, companies are generally losing money, so there is little room for further declines; prices will rise steadily. 　　The removal of electricity price discounts will accelerate capacity reduction. Recently, domestic demand for urea has declined, with weak sales at higher price levels in the market; prices in regions such as Shandong and Henan have started to fall, while other areas are waiting to see how the market develops before making any decisions. Currently, the mainstream ex-factory price is between 1,330 and 1,340 yuan per ton, showing a steady decline; earlier on, the ex-factory price of urea rose from 1,250 yuan per ton to 1,380 yuan per ton. In response to this, Guo Chuanzhi, general manager of the Qingdao branch of Bonglida Agricultural Inputs Chain Co., Ltd., analyzed that urea prices have been on the rise since after the Spring Festival, increasing by about 130 yuan per ton in the past half month. This is mainly because, in addition to agricultural demand, compound fertilizer manufacturers also have needs for purchasing raw materials for production, which drives up market prices. Moreover, as the weather gets warmer, some companies begin to shut down their operations for maintenance, further contributing to the upward trend in prices. 　　Furthermore, after the cancellation of the electricity price incentives, the impact on urea market prices has not been significant so far. Although the production cost increased by 50–100 yuan per ton, the ex-factory price did not rise accordingly. Faced with rising costs, manufacturing companies will see even narrower profits, or most of them will suffer greater losses. Guo Chuanzhi believes that the cancellation of electricity price incentives is beneficial for **, as well as for the overall agricultural supplies sector, since it allows for the elimination of outdated production capacities and helps to address the issue of supply-demand imbalance. However, it imposes additional pressure on manufacturing enterprises. Costs increase, yet market prices cannot rise, making production and operations even more difficult. “This situation is unreasonable and will not last long. At present, companies have only two options to cope with the current market changes: either reduce production or raise prices. If it’s not possible to increase prices, they have no choice but to cut production and lower their operational capacity. From a long-term perspective, this is also an inevitable trend; the nitrogen fertilizer market is already suffering from severe overcapacity. **Introducing policies to reduce production capacity and eliminate outdated facilities will be beneficial for future development. ” 　　There’s no need to be pessimistic about the future of urea. By the end of April, spring plowing has been completed in most areas, and preparations are underway for the summer market. Guo Chuanzhi told reporters that the current approach to spring plowing differs from the past; in the past, there was a period of low demand followed by high sales, but now goods are purchased during the off-season, resulting in losses during the peak selling season. As a result, dealers keep only small stock levels, while farmers tend to buy as they need it. In this context, there are only 1-2 months in a year when purchases are concentrated, with the rest of the time being part of the off-season. Patterns are constantly changing, and the market is influenced by them as well. 　　The main problems facing the current fertilizer market are as follows: first, production companies bear heavy burdens, with costs for electricity, raw materials, and labor all increasing ； Second, low grain prices reduce farmers’ enthusiasm for investment ； Third, there is intense homogeneous competition among compound fertilizer companies, with them essentially engaging in price wars ； Fourth, the overall international situation is sluggish, and the market conditions for commodities as a whole are poor. 　　On April 26, the bidding prices in India were announced; the lowest price was $218 per ton FOB, with the price at the port being around 1,270 yuan per ton. “At this price, many companies will not choose to export as the losses would be severe; instead, they opt for domestic sales since there is demand in the domestic market. Additionally, there has been a return of goods to the ports earlier on, so few companies chose to export in this round of bidding. ”Guo Chuanzhi said, “Under such market pressures, it is expected that the bidding prices in India in the next round will increase, returning to a reasonable range.” Since urea has reached its bottom level after 1-2 years and companies are currently suffering losses in general, there is little room for further declines. On the contrary, the market is not pessimistic about future trends, expecting prices to rise steadily. Furthermore, in terms of potash fertilizers, domestic salt lake prices and production levels determine the price of imported potash fertilizers, and these factors are seeing increasing changes. Additionally, as international prices have reached their bottom, potash fertilizer prices are likely to stabilize in the future. ”

Urea price trends across China Author/Source: China Fertilizer Network Date: 2016-05-06 Clicks: 3 Industrial demand in the urea market remains weak, agricultural demand has not yet increased in the summer, and urea prices continue to fall in some areas. Industrial compound fertilizer manufacturers in Shandong region still show no intention of making large-scale purchases; the main selling price of urea has dropped by 10 yuan per ton, to between 1300 and 1320 yuan ； Dealers in the Hebei region have slightly higher inventory levels, and urea manufacturers are selling at a slow pace. The main factory prices have dropped by 20 yuan to range between 1280–1330 yuan for the lower-end products, while higher-end prices can be negotiated ； The mainstream ex-factory prices in the Henan region remain stable at 1,330–1,350 yuan; manufacturers are seeing average demand for new industrial orders, with transaction prices declining ； A major factory in the Shanxi region is undergoing routine maintenance, which has reduced the average operating rate in that area to around 73.47%. The prevailing factory outlet price remains stable at around 1280 yuan, with transaction prices being slightly lower ； The demand for base fertilizers for rice in Jiangsu region has largely come to an end. Coupled with local rainfall, the prevailing factory prices for urea have dropped by 20 yuan, ranging from 1420 to 1430 yuan, with actual transaction prices being slightly lower ； Gansu region…… (Omitted content is available in the member area; the same applies below) ； The delivery price of small-granule urea from Inner Mongolia to the Heilongjiang region has dropped to……. Internationally, …… The offshore reference price for small-grained urea in our country is approximately……. Overall, there is insufficient production in certain areas; large manufacturers in regions such as Shaanxi and Hunan have plans for maintenance work. Additionally, there is insufficient support from both the international and domestic industrial and agricultural sectors. It is expected that urea prices will continue to decline until mid-May, after which industrial demand is likely to increase and prices may start to rise again. 　　Regional market prices: Unit: yuan/ton (bold numbers in the table refer to large-grain urea) http://www.nmtech.com.cn/sys/sec_zxwz.jpg

Weekly Report on the Urea Market for the First Week of May Author/Source: China Fertilizer Network Date: 2016-05-09 Clicks: 5 The market conditions for urea remained unfavorable this week, with the standard ex-factory prices in most regions dropping by around 10–40 yuan per ton (prices are given per ton thereafter). The areas where prices have dropped are mainly in North China, East China, and Central China, as well as certain parts of the Northwest and South China regions. For example, the standard factory price for small-grained urea in Shandong is around 1300–1320 yuan, a decrease of about 20–30 yuan compared to last week; additional discounts are available at the time of actual purchase. The decline in urea prices is mainly due to weak demand from the industrial and agricultural sectors. It is understood that the operating rate of compound fertilizer plants is around 70%, slightly lower than before. Although some manufacturers say they plan to replenish their raw materials as urea prices fall, they also indicate that they will not make large-scale purchases for now ； Demand in the agricultural market is changing with the seasons, and it is still some time before activity picks up; for now, distributors prefer to stock goods as they are sold. Furthermore, the unfavorable international market conditions and the lack of any positive developments in terms of exports have continued to put pressure on urea prices (for details on the international market, please visit the member area of Zhongfei Network). However, the industry’s operating rate remains at a low level, around 73.4% this weekend, slightly down from last week. This is mainly due to some large manufacturers reducing production for maintenance purposes, coupled with expectations of price increases in India’s next bidding process; such factors have limited the pace of decline in urea prices. Overall, the urea market remains in a phase of fluctuation at low levels. It is expected that urea prices will drop slightly in the near future, but they will rise again soon as industrial demand increases and agricultural demand approaches. The extent of this rise will depend on factors such as industry production rates and export prices. Therefore, manufacturers should try to manage their operations carefully when dealing with urea; it is not advisable to take a purely bearish stance.

Urea still has its attractions; upward trends are likely to continue in the future. Author/Source: Date: 2016-05-06 Clicks: 27. After the end of the May holiday, the domestic urea market remained relatively sluggish. The alternating fluctuations in urea prices failed to dispel downstream manufacturers’ concerns about buying at low prices. The cautious, wait-and-see attitude of distributors led to poor results for the price-cutting promotions carried out by most urea manufacturers at the end of April, and new sales pressures on these manufacturers once again became factors in industry negotiations. However, based on recent market feedback, there is a varying degree of optimism regarding the future prospects of urea. Market supply and demand are once again trending toward tightness. Since the beginning of the year, discussions regarding supply and demand in China’s urea market have ceased to be associated solely with negative factors. As Chinese urea manufacturers adjusted their production strategies in March and April by scheduling maintenance, reducing output, or shifting to other products, the previous situation of oversupply began to shift toward a tighter supply situation, and this became a key factor influencing the fluctuations in urea prices in recent times. According to statistics, as of the end of 2015, China’s total urea production capacity was still at least 75 million tons. Based on the 68% operational rate of urea-producing enterprises across the country from January to April this year, the supply level is not sufficient to cause a surplus, but it also isn’t so low as to result in a shortage. However, as the author understands it, the impact of urea manufacturers that carry out temporary or short-term parking on supply volumes is not taken into account; moreover, there are adjustments to the production ratio of regular urea. Therefore, the industry’s operational rate alone is insufficient as a criterion for assessing market supply and demand. I prefer to predict future supply and demand based on the manufacturers’ sales strategies and inventory levels. Judging from the fact that urea producers were able to raise prices easily on several occasions within the year by accumulating large quantities of orders, then claiming that there was an excess of stock ready for delivery, it is clear that downstream manufacturers lack sufficient inventory to negotiate with these urea producers, and as a result lose their bargaining power. Furthermore, as the summer fertilization period for agriculture approaches, markets in parts of South and Central China will become active in mid-May ； A new wave of market activity will follow in East China, North China, Northwest China, and even Northeast China. At the same time, industrial compound fertilizer manufacturers are also planning to purchase raw materials in advance for the future sales of high-nitrogen fertilizers. Currently, the urea market is in a state of stalemate, and factory prices have declined slightly due to temporary slowdowns in sales. Apart from some large companies making purchases ahead of the holiday, most distribution firms are waiting to see what happens, resulting in relatively limited inventory levels in markets across the country. Once the market picks up, centralized procurement will exacerbate the supply-demand tension in the market, leading to higher prices for urea as a result of the tight supply. The next round of bidding in India is expected soon. India’s first urea tender this year, which concluded on April 25, did not generate much optimism among domestic manufacturers; the results were indeed disappointing. The ex-ship price of $218 per ton was significantly higher than the price at which urea is sold domestically in China, resulting in almost no new orders for shipment to ports. However, according to the latest reports from foreign media, the volume of goods scheduled to be purchased through India’s tender is estimated to be around 700,000 tons. Of this amount, 180,000 tons will come from China, while another 230,000 tons will come from Iran. As for the remaining volume, it is possible, in my opinion, that traders are involved in short-selling activities. In other words, the actual volume of urea sold in India’s first round of tenders may be lower than the volume that was initially offered for sale. This raises another issue: with the peak farming season in India approaching, there is a clear need to import urea to meet the demands. Following the failure of this round of bidding, a new bidding process for urea will surely be launched in the near future, and the expected price will be at least higher than that of the recently concluded bidding round. The reason for this is the shortage of low-cost sources from which urea can be purchased. First and foremost, it should be clear that China’s exports of urea to India account for about 43% of its total exports; this also indicates that India is highly dependent on Chinese urea. At least when domestic demand in China is strong during the first half of the year, if there is a boycott of low-priced exports, India is more likely to compromise rather than engage in a struggle. Therefore, if India issues another tender based on the need for essential supplies, it will have to make concessions in terms of price; as a result, the expected offshore price of urea in China will be 225 dollars per ton. In summary, the domestic summer fertilizer market could see a surge at any time, with the possibility of centralized purchasing ； The production of high-nitrogen fertilizers by compound fertilizer manufacturers has also been put on the agenda, and raw material procurement will provide positive support for the urea market ； In terms of foreign trade, they will wait for India’s next round of bidding to see price increases, and are not necessarily willing to compromise on low prices. Thus, the urea market in China looks promising in the near term; market sentiment is favorable, and prices still have room for recovery.