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Under the pattern of oversupply, urea may continue to go down in the future
2023/6/15
Under the oversupply pattern and cost shift expectations, the 2309 contract may continue to move downward in the future, down to the fixed bed cost of urea near. Strategy side, 2309 contract maintain a short treatment.
Recent urea weak oscillation, the main contract 2309 running range in 1600-1800 yuan / ton, position rose to 417,300 hands.
Macro, domestic and foreign good support commodities to continue the rally. On the domestic front, economic data reflecting a slowdown in the domestic economic recovery, but also to promote domestic policies to increase the expectations continue to heat up. State-owned banks cut deposit rates again, the continuation and optimization of new energy vehicle purchase tax exemptions, etc., indicating that the policy of stabilizing growth will gradually increase. Overseas, the Federal Reserve interest rate hike is coming to an end, the dollar index is gradually falling, and the U.S. labor market performance is strong, its economic soft landing probability is greater. Comprehensive view, in the domestic policy expectations and overseas is currently more controllable risk, commodity short-term rebound is expected to continue.
From the fundamental point of view, the supply side, the latest issue of data show that urea maintained a higher start of 74.2%, with a daily output of about 166,000 tons. The current spot price in mainstream areas is at RMB 2,100-2,200/ton, with short-term downward adjustments ranging from RMB 20-60/ton, but profits are still good. After this round of rapid price increases, fixed bed profit is back to 300 yuan / ton, so we expect that June and July will still maintain a high start-up. On the demand side, the relevant demand indicators have improved under the recent overlay of summer industrial and agricultural demand. Major urea producers pre-collected around 3.8 days, an increase of 5.6% YoY, and enterprise production and sales ratio of 93.2%, an increase of about 4.2% YoY. This drove factories to depot significantly to 550,000 tons, with inventories reduced by 32% YoY. But the subsequent demand is not optimistic, high nitrogen fertilizer production into the end, compound fertilizer start ring began to fall back, around the agricultural demand will basically end in July, when it is difficult to rely on industrial demand alone to digest such a high supply. Therefore, we believe that the price will then drive down the supply of urea by hitting the high cost.
As for the three different domestic processes, the highest cost is the fixed bed process. Affected by its poor environmental protection and high energy consumption, its cost is also relatively high. For the fixed bed process cost calculation, corresponding to the port coal price of 800 yuan / ton, is currently about 1900 yuan / ton. Fixed bed process capacity accounts for more than half of the coal process, if the price can fall to the fixed bed cost, depressing its start-up, it will effectively reduce the supply of urea, to promote the supply and demand rebalance.
Currently 2309 contract plate in the 1600-1650 yuan / ton range fluctuations, this price is in the coal and water slurry and natural gas costs near, by the cost of support, short-term difficult to further downward. However, for the future coal prices, from the coal supply and demand pattern relationship, coal prices still have downside space. If we look at the expected fall in pithead coal prices to 500 yuan / ton, the cost of urea fixed bed or less than 1500 yuan / ton.
In summary, under the oversupply pattern and cost shift expectations, we believe that the 2309 contract may continue to move downward in the future, down to the future urea fixed bed cost near. Strategy side, 2309 contract maintain a short treatment.
Recent urea weak oscillation, the main contract 2309 running range in 1600-1800 yuan / ton, position rose to 417,300 hands.
Macro, domestic and foreign good support commodities to continue the rally. On the domestic front, economic data reflecting a slowdown in the domestic economic recovery, but also to promote domestic policies to increase the expectations continue to heat up. State-owned banks cut deposit rates again, the continuation and optimization of new energy vehicle purchase tax exemptions, etc., indicating that the policy of stabilizing growth will gradually increase. Overseas, the Federal Reserve interest rate hike is coming to an end, the dollar index is gradually falling, and the U.S. labor market performance is strong, its economic soft landing probability is greater. Comprehensive view, in the domestic policy expectations and overseas is currently more controllable risk, commodity short-term rebound is expected to continue.
From the fundamental point of view, the supply side, the latest issue of data show that urea maintained a higher start of 74.2%, with a daily output of about 166,000 tons. The current spot price in mainstream areas is at RMB 2,100-2,200/ton, with short-term downward adjustments ranging from RMB 20-60/ton, but profits are still good. After this round of rapid price increases, fixed bed profit is back to 300 yuan / ton, so we expect that June and July will still maintain a high start-up. On the demand side, the relevant demand indicators have improved under the recent overlay of summer industrial and agricultural demand. Major urea producers pre-collected around 3.8 days, an increase of 5.6% YoY, and enterprise production and sales ratio of 93.2%, an increase of about 4.2% YoY. This drove factories to depot significantly to 550,000 tons, with inventories reduced by 32% YoY. But the subsequent demand is not optimistic, high nitrogen fertilizer production into the end, compound fertilizer start ring began to fall back, around the agricultural demand will basically end in July, when it is difficult to rely on industrial demand alone to digest such a high supply. Therefore, we believe that the price will then drive down the supply of urea by hitting the high cost.
As for the three different domestic processes, the highest cost is the fixed bed process. Affected by its poor environmental protection and high energy consumption, its cost is also relatively high. For the fixed bed process cost calculation, corresponding to the port coal price of 800 yuan / ton, is currently about 1900 yuan / ton. Fixed bed process capacity accounts for more than half of the coal process, if the price can fall to the fixed bed cost, depressing its start-up, it will effectively reduce the supply of urea, to promote the supply and demand rebalance.
Currently 2309 contract plate in the 1600-1650 yuan / ton range fluctuations, this price is in the coal and water slurry and natural gas costs near, by the cost of support, short-term difficult to further downward. However, for the future coal prices, from the coal supply and demand pattern relationship, coal prices still have downside space. If we look at the expected fall in pithead coal prices to 500 yuan / ton, the cost of urea fixed bed or less than 1500 yuan / ton.
In summary, under the oversupply pattern and cost shift expectations, we believe that the 2309 contract may continue to move downward in the future, down to the future urea fixed bed cost near. Strategy side, 2309 contract maintain a short treatment.
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