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The first is that production has increased faster. Since last year, China’s urea production has increased rapidly, basically maintaining a double-digit increase every month. This year has continued to maintain this high growth trend.
The second is that prices have risen earlier in the off-season. From November last year to March of this year, urea prices continued to rise during the off-season. There was basically no decent adjustment in the middle, and the factor for price increase in the peak season had been overdrawn ahead of schedule. Therefore, when the peak season in April and May really arrived, the price would not rise. Fall is also considered normal.
The third is that the reserve policy has played an active role. As the country attaches great importance to urea winter storage, dealers, especially large dealers, have a lot of winter storage urea, these winter urea sold in the peak season, played a positive role in inhibiting the rise in urea prices.
Fourth, the urea export was blocked. In the first quarter, the international urea price increased significantly. In some countries, the urea price even exceeded the synthetic ammonia price. Even if 30% of the export tariff is levied, the export will be profitable. In this case, Shandong, Hebei, Hubei and other places Urea enterprises have increased their export efforts. However, after the second quarter, especially after May, international urea prices fell and exports were blocked.
Fifth, the dealer's attitude is cautious. The price of urea soared in May and June last year and the price of urea fell sharply in July and August. As a result, many chasing dealers stuck in high positions and suffered heavy losses. Therefore, this year's distributors are obviously more cautious, and will not easily purchase goods if they do not have sufficient assurance.
However, on the other hand, the trend of the urea market during the peak season this year is somewhat unexpected, but it is still generally normal and there has been no significant decline. There are two favorable factors supporting the urea price in this year's peak season: First, the basic balance between production and demand. Although the production of urea is now growing faster, the contradiction between production and sales is increasing, but overall, the urea market does not appear to be in serious condition of producing more than sales. The second is production cost support. Since the beginning of this year, the price of coal has risen by 20 to 40 yuan, which is higher by more than 50 yuan. Others, such as electricity prices and natural gas prices, have risen only, causing high urea production costs.
Many industry insiders analyzed that the urea market should improve in June. The main reason is that Shandong, Henan, and other places will usher in the largest amount of fertilizer for corn in one year. At present, the dealers are generally cautious in their mentality, and they are not prepared to prepare more fertilizers. The market start-up time has been pushed back until farmers actually use fertilizers. The market will surely start, prices are expected to rise, and the less ready-to-supply, the more likely it is to rise. And Shandong and other places have always been the vane indicators of the national urea market. The strong urea market in this region will also drive the market strength of other regions in the country.
Why the urea market is not busy
An obvious feature of the urea market this year is the lack of prosperity in the peak season. Originally, April and May were peak seasons for using fertilizers throughout the year, and the increase in prices was the basic trend. However, in April and May of this year, the urea market traded tepid, and prices not only rose but fell. Compared with the prices at the beginning of April, the urea ex-factory price and market wholesale price at the end of May generally fell by 40 to 80 yuan (t price, the same below), reaching a high of about 100 yuan. So why is the urea market not booming this year?