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The profitability of the fertilizer industry is improving, and the future fertilizer market will experience high volatility
2023/8/21
Recently, under the influence of the Russia-Ukraine conflict, the extreme weather of El Nino, the increase of planting area, the new policy of major grain exporting countries and other factors, the price of international fertilizer market keeps rising, which is transmitted to the domestic market, causing the prices of urea, phosphate fertilizer, potash fertilizer and other fertilizers to rise to varying degrees. Industry insiders predict that with the continuous abundant production capacity of fertilizers and pesticides in China and the stable and orderly operation of the agricultural materials market, the fertilizer market will experience high volatility in the future.
The urea market is not weak in the off-season
Recently, the performance of the domestic urea market can be said to be very eye-catching, with a trend of not being weak in the off-season.
On the supply side, after the end of fertilizer use in the spring of previous years, agricultural demand weakened, and the urea market usually experienced a downward trend. Especially this year, there will be over 4 million tons of new urea production capacity put into operation, which will further exacerbate the market. However, the actual situation is that the overall urea production in the first half of the year only increased by 850000 tons year-on-year. Considering that the urea export volume increased by about 290000 tons year-on-year, this is equivalent to an increase in domestic urea supply of only 560000 tons in the first half of the year.
On the demand side, nearly half of the downstream products of urea are mainly in the agricultural market. At the same time, considering the changes in fertilizer usage this year, as well as the changes in domestic planting area and crop structure, the demand for agricultural urea is still increasing. The demand for urea in industrial fields such as automotive and thermal power has also increased. Compared to the increase in urea supply of only a few hundred thousand tons, the domestic urea supply and demand is still in a tight balance. Secondly, a recent announcement from India shows that due to the increase in exports, the price of rice in the country has increased, and the export of high-quality rice will be banned. This will have a significant impact on the global rice market, driving up grain prices and inevitably driving up demand for fertilizers.
The price increase of phosphate fertilizer has emerged
Urea is the leader of all fertilizers, and the strong rise in urea prices has also added confidence to other fertilizers such as phosphate fertilizers.
In the first half of the year, the supply of nitrogen fertilizer and potassium fertilizer in China increased year-on-year, but the production of phosphorus fertilizer decreased significantly year-on-year, and exports increased significantly year-on-year. Data shows that in the first half of the year, the average market price of 55% ammonium phosphate powder for domestic phosphate fertilizer was 3034 yuan (ton price, the same below), a decrease of 12.73% compared to the same period last year; The average market price of diammonium phosphate fertilizer (64% content) was 3973 yuan, a decrease of 1.60% compared to the same period last year.
Xiao Li, an analyst at Zhuochuang Information, said that in the first half of the year, the high points of market prices for monoammonium phosphate and diammonium phosphate both appeared at the beginning of the year, continuing the upward trend at the end of last year, with monoammonium phosphate prices reaching 3442 yuan; The market price of diammonium phosphate has reached 4076 yuan. On the one hand, this is due to the fact that at the beginning of the year, the spring fertilizer preparation in the Northeast market was mainly high phosphorus fertilizer, and there was a positive demand for monoammonium phosphate and diammonium phosphate; On the other hand, at the beginning of the year, the prices of sulfur and synthetic ammonia remained high, and the supply of ore decreased, driving up the price of phosphate rock and providing some support for the production cost of phosphate fertilizer.
With the current increase in the operating rate of phosphate fertilizer, the price of sulfur has stopped falling and rebounded; The synthetic ammonia market has also rebounded driven by urea prices. Meanwhile, due to the impact of the Chengdu Universiade, some phosphate mines in Sichuan have been suspended recently, and production may have decreased. The possibility of a rebound in phosphate ore prices is still increasing. Against this backdrop, the prices of the three major raw materials for phosphate fertilizer have shown an upward trend, leading to strong cost support for phosphate fertilizer.
According to data from Baichuan Yingfu, the market trend of phosphate ore is stable, with an average market price of 853 yuan for 30% grade phosphate ore, which is currently flat. However, market participants have reported that the price of phosphate rock in some regions of China has slightly increased by 50 yuan.
High volatility in fertilizer prices
The extreme weather and the Russia-Ukraine conflict caused the prices of agricultural products to remain high. Internationally, concerns about restrictions on Ukraine's grain exports have caused significant fluctuations in the high prices of US corn and wheat futures. On the domestic front, severe floods have occurred in some areas such as Hebei and Heilongjiang, causing crops to be flooded, raising concerns in the market about reduced yields of corn and wheat.
Regarding the trend of the fertilizer market in the second half of the year, Zhuochuang Information believes that in the second half of the year, domestic fertilizer demand is concentrated in autumn fertilizer preparation and winter fertilizer storage, with a focus on high phosphorus fertilizer, accounting for about 30% to 40% of the annual demand. To avoid the risk of fertilizer preparation, dealers will shorten the fertilizer preparation cycle, and demand release will be more concentrated, with time locked in August to September and December. In terms of inventory, at the end of July, the domestic monoammonium phosphate, diammonium phosphate, and urea industry inventories were all at historically low levels. The recent rise in prices of phosphate and nitrogen fertilizers has also led to an increase in the demand for replenishment in the industry.
The urea market is not weak in the off-season
Recently, the performance of the domestic urea market can be said to be very eye-catching, with a trend of not being weak in the off-season.
On the supply side, after the end of fertilizer use in the spring of previous years, agricultural demand weakened, and the urea market usually experienced a downward trend. Especially this year, there will be over 4 million tons of new urea production capacity put into operation, which will further exacerbate the market. However, the actual situation is that the overall urea production in the first half of the year only increased by 850000 tons year-on-year. Considering that the urea export volume increased by about 290000 tons year-on-year, this is equivalent to an increase in domestic urea supply of only 560000 tons in the first half of the year.
On the demand side, nearly half of the downstream products of urea are mainly in the agricultural market. At the same time, considering the changes in fertilizer usage this year, as well as the changes in domestic planting area and crop structure, the demand for agricultural urea is still increasing. The demand for urea in industrial fields such as automotive and thermal power has also increased. Compared to the increase in urea supply of only a few hundred thousand tons, the domestic urea supply and demand is still in a tight balance. Secondly, a recent announcement from India shows that due to the increase in exports, the price of rice in the country has increased, and the export of high-quality rice will be banned. This will have a significant impact on the global rice market, driving up grain prices and inevitably driving up demand for fertilizers.
The price increase of phosphate fertilizer has emerged
Urea is the leader of all fertilizers, and the strong rise in urea prices has also added confidence to other fertilizers such as phosphate fertilizers.
In the first half of the year, the supply of nitrogen fertilizer and potassium fertilizer in China increased year-on-year, but the production of phosphorus fertilizer decreased significantly year-on-year, and exports increased significantly year-on-year. Data shows that in the first half of the year, the average market price of 55% ammonium phosphate powder for domestic phosphate fertilizer was 3034 yuan (ton price, the same below), a decrease of 12.73% compared to the same period last year; The average market price of diammonium phosphate fertilizer (64% content) was 3973 yuan, a decrease of 1.60% compared to the same period last year.
Xiao Li, an analyst at Zhuochuang Information, said that in the first half of the year, the high points of market prices for monoammonium phosphate and diammonium phosphate both appeared at the beginning of the year, continuing the upward trend at the end of last year, with monoammonium phosphate prices reaching 3442 yuan; The market price of diammonium phosphate has reached 4076 yuan. On the one hand, this is due to the fact that at the beginning of the year, the spring fertilizer preparation in the Northeast market was mainly high phosphorus fertilizer, and there was a positive demand for monoammonium phosphate and diammonium phosphate; On the other hand, at the beginning of the year, the prices of sulfur and synthetic ammonia remained high, and the supply of ore decreased, driving up the price of phosphate rock and providing some support for the production cost of phosphate fertilizer.
With the current increase in the operating rate of phosphate fertilizer, the price of sulfur has stopped falling and rebounded; The synthetic ammonia market has also rebounded driven by urea prices. Meanwhile, due to the impact of the Chengdu Universiade, some phosphate mines in Sichuan have been suspended recently, and production may have decreased. The possibility of a rebound in phosphate ore prices is still increasing. Against this backdrop, the prices of the three major raw materials for phosphate fertilizer have shown an upward trend, leading to strong cost support for phosphate fertilizer.
According to data from Baichuan Yingfu, the market trend of phosphate ore is stable, with an average market price of 853 yuan for 30% grade phosphate ore, which is currently flat. However, market participants have reported that the price of phosphate rock in some regions of China has slightly increased by 50 yuan.
High volatility in fertilizer prices
The extreme weather and the Russia-Ukraine conflict caused the prices of agricultural products to remain high. Internationally, concerns about restrictions on Ukraine's grain exports have caused significant fluctuations in the high prices of US corn and wheat futures. On the domestic front, severe floods have occurred in some areas such as Hebei and Heilongjiang, causing crops to be flooded, raising concerns in the market about reduced yields of corn and wheat.
Regarding the trend of the fertilizer market in the second half of the year, Zhuochuang Information believes that in the second half of the year, domestic fertilizer demand is concentrated in autumn fertilizer preparation and winter fertilizer storage, with a focus on high phosphorus fertilizer, accounting for about 30% to 40% of the annual demand. To avoid the risk of fertilizer preparation, dealers will shorten the fertilizer preparation cycle, and demand release will be more concentrated, with time locked in August to September and December. In terms of inventory, at the end of July, the domestic monoammonium phosphate, diammonium phosphate, and urea industry inventories were all at historically low levels. The recent rise in prices of phosphate and nitrogen fertilizers has also led to an increase in the demand for replenishment in the industry.
Industry insiders expect that with the continuous abundance of domestic fertilizer and pesticide production capacity and the stable and orderly operation of the agricultural materials market, the profitability of the fertilizer industry will begin to improve in the near future, and the fertilizer market will experience high volatility in the future.
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