Why does China become the highland of urea price?

In recent years, the price of urea in China is basically the lowest in the world, especially last year. In general, the FOB ton price of urea in China is US $20,30 lower than the international price, and sometimes even US $50 lower. And many people have become accustomed to the low price of urea in China and seem to take it for granted. However, the situation has been reversed this year. The price of urea in China is 15 to 20 US dollars higher than that in the international market. What is the reason why the price of urea in China has changed from a depression to a highland?

First, let's take a look at the domestic market. There are two reasons why domestic prices are going up:

First, there were a large number of exports last year, while output decreased compared with the same period last year, which reduced the supply of goods in the domestic market and alleviated the contradiction between supply and demand in the market. According to the China Nitrogenous Fertilizer Industry Association, the amount of resources has decreased by about 10% this year compared with the same period last year. According to the data, in 2014, China's urea production decreased by 1.15 million tons compared with the same period last year, the export volume increased by 5.35 million tons, and the annual supply decreased by 6.36 million tons compared with the same period last year. Consumption increased by 1.5 million tons compared with the same period last year. 2014 not only digested the previously accumulated stocks, but also consumed most of the urea that should have been carried forward to 2015. On the demand side, urea agricultural demand is expected to remain stable in 2015, and industrial demand will maintain a growth rate of 6% to 8%. It is estimated that the industrial demand for urea in 2015 was 16 million tons, an increase of 1 million tons over the same period last year. The main increment comes from wood-based panels, thermal power, cement flue gas denitrification, vehicle urea and so on.

The second is cost support. Urea enterprises suffered large losses. According to industry statistics, in 2014, the nitrogenous fertilizer market was extremely depressed, and enterprises lost a large area. The industry's main business income was 261.67 billion yuan, down 6.2 percent from the previous year, with a loss of 5.66 billion yuan. There are 331 enterprises above scale in the industry, with a loss area of 47.1%.

Let's take a look at the international market. In the first few months of this year, urea in the Baltic Sea fell by $70 / ton, while urea in the Black Sea fell by $64 / ton. There are three reasons for the sharp drop in urea prices in the international market:

First, international oil prices have fallen sharply. The vast majority of international urea uses natural gas as raw materials. after the sharp drop in oil prices, the price of natural gas is also lower, reducing the production cost of enterprises. Last year, the Ukrainian urea plant was forced to stop production because of high natural gas prices and heavy losses. But with natural gas prices falling this year, companies are still producing even though urea prices this year are $20 a tonne lower than last year's lowest. It is reported that manufacturers will not consider parking or reducing production for the time being, unless the price of urea is reduced by another $10 / ton.

Second, the demand is not good. Thailand imported 36000 tons of urea in February, a record low. The import volume in the same period last year was 181000 tons. The total import of urea from January to February was only 178000 tons, a decrease of 37 percent over the same period last year. Australia imported 158000 tons of urea in February and 179000 tons from January to February, a decrease of 32000 tons over the same period last year. In addition, the United States and other countries have postponed the demand for urea because of the cold weather. Europe is weak and demand is limited.

Third, they are afraid that China will export a large amount of urea. Last year, China's urea exports reached 13.62 million tons, accounting for about 30 percent of international trade. This year, China's chemical fertilizer export policy was further relaxed, abolishing the off-peak season policy and changing to a uniform tariff of 80 yuan per ton for the whole year. This has caused panic among some international manufacturers, fearing that China's urea exports will increase greatly this year, so they adopt a low-price policy to deal with it.

Facts have proved that the price of urea in China can be completely higher than the international price. Chinese urea enterprises should establish self-confidence, do not improperly belittle themselves, and do not always think about low-price exports. It is hoped that the higher price of urea in China than the international price will become the new normal.