​ Urea prices unlikely to rise significantly amid increased supply
Release_time:2021-01-13 09:29:51 Source:original

Urea prices rose in November and December as the production plummeted. The daily urea production fell to 112,000 tons because of the production cuts in Jincheng, Shanxi province and shutdown of operations in Southwest and Northwest China for limited natural gas supply. Some analysts believe that the prices of urea may continue to rise due to the relatively good demand and exports. However, some doubt that the prices will continue to go up, mainly for the following reasons.

First, the market supply of urea is estimated to increase. It is said that the granular urea units in Jincheng will resume production in early January, which will lead to a daily production increase of 6,000-8,000 tons. Meanwhile, some new urea plants in Shandong and Hubei will be put into operation soon, so the overall daily production in China will rebound to 130,000 tons. In addition, some natural gas-based urea plants in Southwest China are expected to resume production after mid-January, therefore the supply of urea will increase significantly in the future, which will restrain urea prices from rising further.

Second, demand for urea is not very strong. Demand for urea from agricultural sector has been quite low since October, while demand from industrial sector was also sluggish because some enterprises had to halt production frequently due to environmental inspections. Moreover, India stopped inviting for bids temporarily. The prices of urea picked up in December mainly because the enterprises that undertake the task of off-season commercial reserves were buying urea.

To sum up, although urea prices in some regions rose in December compared to earlier period (for example, urea prices in Heilongjiang province rose to 1,900 yuan or higher from 1,820-1,830 yuan/t), not many deals were made in the market. Only some compound fertilizer enterprises with low inventory had to purchase some urea to ensure production. Urea prices may rise slightly in January as plywood plants and compound fertilizer enterprises start to make purchases, but the market may fluctuate when daily urea production increases rapidly.