Is the price of urea up or down? Give me a reason not to fall first!

With the continuous entry of new urea production capacity into the market in recent years, and the scale of the plant is often more than one million tons, has the status of established enterprises been shaken?

Most urea enterprises continue to find a way to survive from the plight of overcapacity, the production process is constantly optimized, but also enhance their own competitiveness. So, how much reference value does the traditional leading enterprise still have?

In addition, the market has changed, and the agricultural and industrial demand for urea is changing due to the adjustment of the industrial structure of various provinces. Should the so-called "benchmarking enterprises" be re-selected?

The cost area is not loose for the time being.

The sharp rise in coal prices, the rise in railway freight and the shortage of logistics capacity are the direct reasons for the rise in production and operating costs of urea enterprises. According to the analysis of the above three aspects, there is little possibility of a short-term pullback in coal prices, the pace of resuming production of coal mines closed in the previous period is slow, the supply of anthracite in the market is tight, and the railway transport capacity is insufficient, the mainstream coal purchase price of urea enterprises to the plant is 800 to 900 yuan, and some are even higher, which also leads to the production cost of urea at the coal head of 1350 to 1450 yuan in the main urea producing areas (Shandong, Shanxi, Henan, Hebei, etc.).

In this way, although urea prices across the country have increased by as little as 200 yuan to as much as 300 yuan in the past two months, in the face of the doubling of coal prices, most urea enterprises say that they can only reach the break-even point. This can be verified by keeping the urea industry at a low operating rate during this period of time. From canceling concessions to raising freight rates by some railway bureaus, and then to increasing freight charges by a percentage, the transport cost of urea has actually increased by 10% to 20% (a larger increase in places such as the southwest). Although some people in the industry said that the tight situation of railway capacity in mid-to-late December will ease, but the Spring Festival transportation, which will begin on January 13, is obviously a new round of test. Due to the great pressure of logistics, the expected supply of urea in Inner Mongolia and Inner Mongolia has become unknown, and the supply of urea in the southwest and South China markets is tight. This is also one of the reasons why urea prices in various places are "high fever and difficult to retreat".

The future supply is expected to be tight.

Although the price of urea has risen sharply recently, compared with the increase in cost, it is not profitable. However, the urea industry, which is at the break-even point or still hangs upside down, can only maintain a low operating rate, and the operating rate of national urea enterprises is still less than 52%. And some enterprises in production have resold liquid ammonia, the actual supply of urea may be overestimated.

However, from the recent sharp rise in urea prices, enterprises seem to have tasted the benefits of reducing production, or at least feel the damage of "price war". At present, urea enterprises that fail to produce at full capacity should not increase production lightly until the price reaches a reasonable profit point.

Last week, some people in the industry made a simple estimate of late supply: if the operating rate of 52 per cent is maintained, the national urea production will be about 22 million tons in the second half of the year. Excluding the estimated export volume of 5.5 million-6 million tons in the second half of the year, and then removing the industrial urea consumption consumed by real estate warming in the third quarter, the supply of domestic urea light storage market is obviously tight until the end of the year and even before February next year.

With the slow pace of the current round of urea price increases, downstream dealers are bound to have a certain game attitude towards high-priced urea, and agricultural light storage will be further postponed, which is very likely to become the reason for urea to rise again in the later stage.

The high price of urea does not lack the support of cost and supply side, the high cost does not fall, the operating rate remains low, the dealer game price, light storage slows down, all these will aggravate the supply pressure of urea market in spring. At least from the current situation, urea does not have the conditions for a sharp price drop for the time being.

(source: agricultural Materials Guide, author: Yang Luyi)