Urea Price Reversal

By the end of September, urea prices did not meet the expectations of the public and helplessly re-emerged after the rise and fall situation, Shandong Lianghe Shanxi, Jiangsu and Anhui factory quotations fell not much, the cumulative decline of 20-40 yuan/ton, transaction prices fell sharply! The receiving price of urea in Linyi Compound Fertilizer Plant dropped from 1860-1900 yuan/ton before the Mid-Autumn Festival to 1810-1820 yuan/ton on September 17, then rose slightly to about 1830 yuan/ton, and fell again to 1810-1820 yuan/ton by September 23.

Urea prices have been reversing over and over again, so what should we do with the distributors who want to take the goods for winter storage?

Cold! Hee-hee, make a joke. To return to the truth, this article will briefly analyze the urea winter storage market this year from the aspects of picking up the goods, when to pick up the goods and not preparing for the winter storage.

Suppose we have taken urea for winter storage, that is, when the price of the first two or three times “suspected bottom”, what should we do? One way is to sell part of the product when the price rises and there is a certain profit. The other way is to slow down the resale or carry out a longer-term reserve for distributors who take goods near 1 700 yuan/ton of Shandong, 1 650 yuan/ton of Shanxi and 1 500 yuan/ton of Inner Mongolia. The premise is not to take into account storage costs, capital interest and so on.

For distributors who are considering winter storage, Zhongfei’s suggestion is that they can get a small or moderate amount of goods when they meet super-low prices or meet our psychological expectations. So when is the best time to store urea in winter? Which is the time point at which the next price bottoms?

First of all, we have to admit that the trend of urea price in the second half of this year is totally different from the previous two years, neither rising all the way from late August in 2017 to spring, nor rising all the way from early August in 2018 to the end of November. The trend of urea price in the second half of this year is rising from July to August-September. The three time. The pace of winter storage operation has been disrupted, unable to refer to the previous two years, after all, this year’s supply and demand situation is different.

As far as the demand is concerned, it is well known that due to the poor economic environment, the demand for urea in domestic industrial plywood factories and power plants decreases again and again. In the aspect of industrial direct fertilization, the amount of direct application of urea has been reduced due to the substitution of high nitrogen compound fertilizer, formula fertilizer, nitrogen and potassium topdressing, extruded granular ammonium chloride and ammonium sulfate. Fertilizing directly or into multiple compound fertilizers and then fertilizing, the total return of urea is needed. The demand for urea and the price support of industrial compound fertilizer plants are very strong.

On the supply side, a factory in Inner Mongolia has been put into operation since the end of 2018, a factory in Shandong has increased its load since the middle of 2018, and a large factory in Shanxi has been carrying out full load for a longer time since 2018. In spring 2019, the time for urea manufacturers in Southwest Inner Mongolia to resume production is ahead of the previous year. In view of the high urea profit in these two years, many urea manufacturers in Southwest Inner Mongolia have made great progress. High-load production by factories has made the time of urea production in China reaching 150,000 tons or more per day longer than 160,000 tons. Since April this year, urea production in China has been basically more than 150,000 tons per day (except in late August). It is recalled that the daily production of urea before that was more than 150,000 tons or in spring 2017 and July 2016. Go ahead (at that time, the daily output was more than 160,000 tons or even as high as 200,000 tons). In short, urea has returned to a slightly oversupply, which is about to reach a more obvious oversupply, i.e. the need for exports to ease domestic pressures.

Secondly, the low price reduction of export volume makes the winter storage operation of our dealers more difficult. Export is a double-edged sword. When domestic and international prices are higher, export is the icing on the cake. When domestic and international prices are low, export is a blow. For example, the label that ended on September 13, which is 260 US dollars per ton offshore, and the price of urea from China to Yantai Port is as low as 1750 yuan per ton. The shortfall is that China’s export volume of goods may be only 100,000 tons, the price and quantity are hit. After all, if the export situation is good, then the domestic inventory situation will be moderate, and the price is expected to rise significantly after the winter storage. Our distributors should consider increasing the quantity of winter storage appropriately when the export has improved markedly.

Thirdly, the best winter storage time, of course, can not be said to be the best time to pick up goods. First, before National Day 11, urea manufacturers need to consider the order and transportation status of goods for more than half a month before and after National Day. They can pick up a small amount of goods at the time of low-cost purchase orders. Second, after the holidays, industrial demand or export. If demand for urea is still lagging behind, urea prices may have new lows. After all, by the end of October, the compound fertilizer enterprises will start to store and collect money in winter and produce fertilizer in winter. In November-December, according to the cold weather or not, according to the situation of civil coal and natural gas, the start-up of coal head, especially gas head urea enterprises will be limited to a certain extent, and the daily output of urea is expected to be less than 140,000 tons. Even 130,000 tons, urea prices are expected to rise to some extent.

Finally, in the general economic environment, urea prices are difficult to rise dramatically, or will be repeated after the rise. As for winter storage, a small amount or an appropriate amount of goods can be taken, otherwise it will face greater risks.