Urea trend weakens in April

Domestic imbalance in production and sales of urea in the first quarter According to the production statistics released by the National Bureau of Statistics, the total physical production of urea in January-February 2013 was 10.488 million tons, a year-on-year increase of 2.8%. Since March, the supply of natural gas in the southwest and northwest China has resumed normal, and the operating rate of gas-headed urea companies in Xinjiang, Gansu, and Sichuan has improved significantly. Based on this calculation, the total domestic urea production will exceed 17 million tons in the first quarter. In contrast, the spring plowing in 2013 was hardly satisfactory and the market operation was not satisfactory. Demand for agriculture remained flat, and prices in East China and North China started alternately. However, due to the “cold winter” and adjustment of agricultural fertilizer structure, overall sales were lower than expected. So that the Northeast market has not yet started, no one in the industry has risen. Originally expected high nitrogen fertilizer production can be used as a good, but unfortunately many small compound fertilizer plants prematurely consumed this part of the demand, it is difficult to support. In addition, some enterprises that have chosen to collect shipments in advance also have no orders due to the price of HK$2,150/ton. By the end of the first quarter, there was a slight oversupply in the domestic urea market. The actual ex-factory prices for urea in Shandong, Hebei, and Shanxi were only RMB 2030-2050/t.

International urea market trend is weak In the face of the domestic urea market downturn, the industry began to hope that the export support for the market later. However, from the observation of the international urea market in the past two weeks, the situation is still not clear. First, international demand was affected by the weather and the purchase period was postponed. The U.S. was caused by the continued cold and wet after strong snowfall, which resulted in the conversion of large amounts of corn to soybeans, and the price of corn was also lower than expected by 6%, which would directly reduce its demand for urea. (US Department of Agriculture News, March 28th); Secondly, the FOB prices quoted by exporting countries are high, and they are not attractive to international buyers. This is also the main reason why international urea prices have generally declined in the past half month; again, the purchasing countries are not in a hurry to purchase. Due to a certain amount of inventory in the early period, buyers from India and Latin America may not return until mid-April. In the market, the new round of tenders just launched by Pakistan also has the meaning of waiting. According to the market supply and demand, the price game will be played. At least for the moment, the international market has a low turnover, and traders try to trade in small quantities as much as possible. Most buyers still take a wait-and-see attitude.

In April, Jigang and agricultural fertilizers may have a clear and superimposed arrangement. The domestic market for spring plowing can be said to be a disastrous outcome. Some distributors began to pay attention to preparing fertilizers in summer. This shift in operational thinking in time can be seen as a shallow understanding of the conservation of agricultural fertilizer demand in the industry. In short, since the amount of fertilizer used for spring plowing is reduced, it may be possible to supplement it during the summer season or at the autumn. Therefore, dealers also have to copy the "bottom" will. However, taking into account the implementation of a low tariff of 2% on China’s urea exports from July to October, and comparing the export volume of urea during the January-February period, which can still reach 614,000 tons, the trend of catching up with Hong Kong in advance is more obvious. In addition, India, Latin America, Pakistan and other countries will also conduct the first round of bidding this year in April, and the international price trend is expected to become clear. Once the market accepts 365 U.S. dollars of offshore ton price for small grain rice, it means that China's ex-factory price can be calculated to 2,100 yuan/ton, which is expected to stimulate new rounds of traders in Hong Kong. By then, there may be overlap between catchment and summer preparations.

From the above, it can be inferred that the domestic urea price has been declining in recent days due to the weak influence of domestic demand and foreign trade. However, with the end of month-end promotions by urea manufacturers, the ex-factory price during the Qingming period may stabilize. Afterwards, we should focus on the international market trend. For example, the purchasing country can accept FOB 365-370 yuan/ton FOB for Europe. Well, China's urea prices are expected to rebound in mid-April.