Urea, which has already been oversupply, will continue to increase its production in 2012. Domestic producers will face more severe competitive pressures. According to the data from Chemical Industry and Trade, China’s urea production will increase by 5 million tons in 2012 to 63 million tons, but demand will increase by only 1.87 million tons to 49.87 million tons. Urea supply surplus will continue in 2012, and enterprises with resources and capital advantages will take the initiative in the market.

In addition, due to China's tightening urea export policy, urea exports will remain weak in 2012. According to the documents of the Customs Tariff Commission of the State Council, January to June and November to December 2011 are peak seasons for urea demand in China, and China’s urea exports levy 110% of taxes. This policy will continue to be implemented in 2012. Analysts said: "According to the tightening effect of urea export policy, China's urea export volume has dropped significantly in 2011 and is expected to continue its downturn in 2012."

The commissioning of some new urea plants will also exacerbate the oversupply of the market. Xinjiang Yihua Chemical Group's Xinjiang Yihua Chemical Company is located in Changji, Xinjiang, with 1.4 million tons/year urea plant, Zhonglan Chemical Company's 1 million tons/year urea plant in Jincheng, Shanxi, and Kaifeng Jinkai Chemical Company's 800,000 tons in Kaifeng, Henan The annual urea plant, Inner Mongolia Hulunbeier Jinxing Chemical Company's 800,000-ton/year urea plant in Hulunbeier, Inner Mongolia, will be put into operation in 2012. In addition, there are 2.62 million tons of production capacity per year production time changed from 2011 to 2012.

In addition, it is expected that the price of urea raw materials, coal and natural gas, will increase in 2012, and production costs will increase. The average price of urea in 2011 was 2,100 yuan/ton, and it is expected that the demand for low season in 2012 may fall to 1,900 yuan/ton. Market participants said that macroeconomic factors, such as the uncertainty of the global economic outlook and domestic inflation, will further affect the market.

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