Replenishment of the good has been fulfilled urea futures prices are now the stage of retreat
2023/7/6
The key point of the future urea market game is the movement of international urea prices and domestic urea exports. If the international price rebounded sharply in the third quarter, the Indian bidding increased, domestic urea exports may exceed expectations, and the probability of urea price rebound increased.
Late March 2023 to mid-May, urea futures prices have been in a weak downward trend, the main urea contract futures price fell from 2,400 yuan / ton to a minimum of 1,600 yuan / ton near the supply of urea than the weak pattern of demand is difficult to change, leading to more pessimistic market expectations, the spot industry mentality is weak.
Enter a new cycle of excess capacity
Since late May, urea futures prices after two bottoming, prices stabilized briefly. June to early July, urea futures prices began to rebound, urea main contract futures price from 1600 yuan / ton up to 1930 yuan / ton. The main reasons for this: the low inventory in the middle and lower reaches in the early stage, the northeast and other parts of the region to open agricultural needs to replenish storage, coupled with international prices upward and other factors, the spot market sentiment turned positive, the upstream enterprises significantly to storage.
On the supply side, there are more new urea units put into operation in 2023. It is understood that the new and replacement urea plant capacity in 2023 reached 6.02 million tons (5.22 million tons of new and 800,000 tons of replacement). In addition, according to the Nitrogen Fertilizer Association, there will be 10.34 million tons of capacity urea plants planned to be put into operation from 2023 to 2024, including 5.1 million tons of replacement capacity and 5.24 million tons of new capacity. In the medium and long term, more new urea capacity will be added in 2023 and 2024, and the urea industry is likely to have entered a new cycle of overcapacity.
In previous years, more new urea units were put into operation, resulting in the beginning of 2023, urea daily production basically maintained at a historical high of about 170,000 tons, urea industry start-up rate increased compared to the same period last year, after several new urea units were put into operation in the third quarter of 2023, daily production may remain above 180,000 tons (specific attention to the commissioning progress). Overall, the urea supply side of the high supply is basically a "clear card", the future point of conflict is mainly focused on whether the demand can be a large-scale recovery, as well as the international urea prices can rebound, export expectations change.
Agricultural demand gradually decline
From the demand side, in June 2023, some domestic areas open wheat harvest mode, Henan, Jiangsu, Anhui and other places corn fertilizer start one after another; Southwest, Jiangsu, Anhui and other places rice fertilizer, fertilizer preparation open; Northeast due to the low inventory in the early, fertilizer postponed a month, resulting in the Northeast concentrated take demand. June domestic agricultural demand seasonal warming, with the downstream inventory of the early The seasonal rebound in domestic agricultural demand in June, with the downstream inventory has been at a low level, resulting in the agricultural downstream ushered in a phase of replenishment demand, so that the previous sluggish market rebound. It is obvious from the inventory that the urea enterprises shipping tension, inventory continues to reduce: 1.1 million tons of total urea enterprise inventory in early June, in the last month continued to decline to near 320,000 tons.
However, after this round of inventory replenishment, agricultural demand in July-August has turned marginal weak. Corn fertilizer and fertilizer preparation, able to last until about mid-July, with the terminal gradually applied, fertilizer preparation will be near the end, the late agricultural demand will also gradually decline, the downstream concentration of replenishment in advance of the overdraft of future agricultural demand. Industrial demand, compound fertilizer high nitrogen fertilizer production ended, the next round of take demand will need to wait until mid to late August to open again (the current compound fertilizer is in the gap before the start of production of autumn fertilizer), in the domestic commodity is basically under the depot cycle, the demand for melamine may not be a significant release.
Focus on international price changes
The key point of the future urea market game is the movement of international urea prices and domestic urea exports. On the international front, demand is in a rebound due to the phased rebound in international natural gas prices and the arrival of the peak season for soybeans and other crops in South America.
In late June, international urea prices in the United States, Brazil and Western Europe stopped falling and remained stable for the time being; starting in July, with the arrival of the Indian monsoon season, rainfall picked up, and the future of Indian tenders will increase. If the international price rebounded sharply in the third quarter, the Indian bidding increased, domestic urea exports may exceed expectations, the probability of a phased recovery in urea prices increased.
Overall, we believe that the June downstream replenishment favorable has been realized, short-term urea futures prices will be a phase back, the future of urea futures prices can be rebounded again in the international urea prices and exports can be released, if the third quarter international gas prices rise, international urea prices rebounded, exports increased, urea futures prices rebound can be expected, but the height is limited.
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