How to treat the fall in urea prices

In July, driven by the demand for agricultural fertilizers in summer, the market price of urea continued to rise. Take Shandong as an example. In only 4-5 days, the ex-factory price rose by 100 yuan/ton, and the mainstream ex-factory price quickly rose to 1800 yuan/ton. In the process of continuous price hikes, dealers’ enthusiasm for getting goods was ignited, and the depressed market also ushered in a long absence. However, in the second week of July, this rally was rapidly reversed. In just two days, the mainstream ex-factory price in Shandong dropped again to RMB 1,700/ton, and the market was hit hard again. Dealer confidence was severely hit. Therefore, the industry calls for the need to stabilize the domestic market in the off-season and wait for the international market to pick up and then export transactions.

A rational view of the sluggish off-season urea prices bottoming out in early July has brought a bit of joy to the market and also shows the demand for agricultural fertilizers. Sun Deliang, general manager of Shandong Alliance Group Sales Co., Ltd. believes that in five days, the mainstream price in Shandong has increased by nearly RMB 100 per ton. Apart from hype factors, it is mainly driven by seasonal demand. "Although urea prices continued to rise last week, manufacturers generally ship well. Although there are natural gas price increases, they are mainly driven by the demand for summer maize fertilizer."

In the second week of July, the price of urea did not continue to rebound, but there was a sharp decline. Sun Deliang believes that with the end of the first round of fertilizer preparation, it is normal for urea prices to adjust. "The export situation is not optimistic. Enterprises are actively turning to the domestic market. However, due to the dry weather, the stocker's first round of the stocking cycle will be 3-5 days. With the end of stocking, the price will lose support and the downward adjustment will become inevitable."

Huang Xiaobing, general manager of Huanong Agricultural Resources Chain Co., Ltd., also agreed that with the end of the summer fertilizer season, the recent decline in urea prices is also expected, but the downward trend will not continue too long, the production companies will also need to see Cost and international market conditions. “The current ex-factory prices are calculated at full cost, and some companies have already been operating at a loss. With the onset of the off-season and the decline in prices, the overall operating rate of the urea industry will be significantly reduced, and prices will tend to be stable.”

The export situation is still grim Although the relatively loose export policy in 2013 was once interpreted by the market as the biggest advantage in relieving domestic production capacity, from the actual situation, the current export situation is still severe. Sun Deliang said that from the perspective of India’s tendering situation, it is indeed intended to drive down prices to secure cheap sources of supply. “The price of the first tender in India is very low, but domestic companies can still accept it, but the second tender price is only 303.33 US dollars / ton, discounted the ex-factory price of China's urea is only 1,550 yuan / ton, this is the Chinese enterprises Unacceptable, therefore, the second tender price has not been recognized by domestic enterprises."

Obviously, the second bidding price in India is far lower than the production cost of the company. If the transaction is completed, the company will definitely lose money. However, in the face of the port cargo volume of more than 3 million tons at present, Huang Xiaobing also seems helpless. "In the context of excess capacity, international buyers use China's current export tariff policy to suppress prices, and push down international prices at the onset of the export period, while domestic companies still gather a large number of ports before the export period, making exports completely complete. Loss of the right to speak, degenerate into a situation where anyone can kill."

Domestic prices must remain stable Since the current export situation is grim, urea companies should still pay attention to changes in the domestic market. Sun Deliang said: "The key to the current market is whether the market will not take the goods rather than the company's factory price, whether it is 1700 yuan / ton or 1900 yuan / ton, if the market stagnates, the volume can not guarantee that the company's normal operation Affected by the current total cost of urea companies at 1,850 yuan/ton and production cost at 1,700 yuan/ton, that is to say, most companies have already suffered losses according to the current factory prices, but they are still maintaining production, so overall The operating rate of the industry is still at a high level.” In the face of the downturn in the international market, Sun Deliang stressed that at present, domestic companies should still control production, rely mainly on stabilizing domestic prices, and only stabilize domestic prices and wait to be in line with international markets in order to be fair and reasonable. Deal.

Huang Xiaobing also believes that only by stabilizing domestic prices can the interests of enterprises be guaranteed. "The current trend of international urea prices is a bit ignorant, completely detached from the current trend of international crude oil prices, so the possibility of a later rise is greater, only the international price rebound, can promote exports, if the domestic prices follow international prices, domestic enterprises The interests will surely be damaged.” Meanwhile, Huang Xiaobing emphasized that the current overcapacity in the market is badly magnified by the market, and the market needs positive energy. The price increase in the peak season at the beginning of the month also proves that the market demand remains in the continuous decline process. There is not enough supply in the grass-roots market.