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Urea prices have this kind of 'dropping' trend. There are two main reasons:
First, the urea export situation is not as good as expected. The original people placed great hopes on the export of urea export tariffs reduced to 15% in November and December, but the actual situation was counterproductive. For a period of time, urea in the international market not only fell in price all the time, but also the enthusiasm for goods is not high. At present, the FOB price of urea in the Baltic Sea has dropped to around US$200, and the FOB price of China’s urea exports has also fallen to around US$230, down by nearly US$20 per ton from US$248 in October. If tariffs and freight are deducted, US$230 is deducted. The FOB price is only equivalent to the domestic ex-factory price of 1,520 yuan. This low price has caused many companies to refuse to export. As the export was blocked, the price of urea continued to drop, while the dealers' psychological influence of 'buying up and not buying or falling' made the manufacturers continue to press down prices and wait for others to buy, thus forming a vicious cycle of price.
Second, this year's distributors have a cautious attitude toward winter storage. Apart from the fact that export pull has not produced the expected results, there are still three concerns about the current distributors, namely, the policy factors are uncertain, the situation of the farmers' needs in the next year is not the same, and there is concern that urea production will increase too much next year.
The policy factor is that some dealers are most worried about, because once the country limits the price of urea, it limits the profitability of dealers, so dealers are always enthusiasm for this year's winter storage. In 2005, due to rising prices of chemical fertilizers and other agricultural materials, farmers’ income from grain production declined, which had a detrimental effect on the enthusiasm of growing grain. During the winter season, the planting area of ​​winter crops such as rapeseed decreased significantly, resulting in a lack of demand for chemical fertilizers. Wang, these dealers are not a small blow, and some dealers even look after the market. Due to the relatively good urea situation in recent years, many places, especially those with advantages in raw materials, have newly added urea plants. The urea production capacity is expected to increase by about 5 million tons next year; in addition, the country will continue to adopt strict restrictions on urea exports next year. Exports are expected to be even lower than in 2005. Therefore, the contradiction between supply and demand in the domestic urea market next year is expected to be greater than this year. Taking into account these factors, dealers are generally not optimistic about the market trend of urea next year, and also always be cautious about the winter storage.
The author believes that although the current price of urea continues to fall, its outlook should not be oversold. Because, 70% of China's urea consumption is in January to July, especially in March to July, and the new urea plant will be mainly put into production in the second half of next year. In other words, there will be no oversupply in the domestic urea market from March to July next year, and it may even be in short supply. In addition, even if the contradiction between supply and demand increases in the second half of next year, the urea market may experience a downward trend. However, if the price falls too much, it will lead to losses for the production enterprises. Some companies will be forced to cut production or stop production, and actual production will also decrease. . In other words, the market is a lever that automatically balances new capacity. Therefore, people do not have to look at new production capacity so terribly. The market-oriented reform of chemical fertilizers is the general direction. The introduction of new policies by the country will also consider the interests of producers, distributors, and farmers. The demand for chemical fertilizers will not be reduced much next year.
The domestic urea market is still in a downtrend recently. Most of the current ex-factory prices are from RMB 1,520 to 1,650 (t price, the same below). The previous period was the lowest price of 1,650 yuan, which has now become a higher price, and the lowest ex-factory price has fallen. 1500 yuan. However, I believe that the outlook for urea does not have to look too far.