Compound fertilizer plants continue to reduce their demand for purchasing light storage on demand
2023/11/21
Message 2: On the afternoon of November 8, 2023, there were two news reports from a meeting in Beijing: the legal inspection time has been extended to no less than 60 working days, and urea exports will be subject to a quota system in 2024.
How much can the price of urea in our domestic market decrease as exports decrease? It cannot be said that a moderate drop back to 2200 yuan/ton (the low-end factory price in Shandong and Henan before and after October 12th) is not a problem.
Firstly, with a decrease in exports, the prices of our domestic light storage and purchasing goods are expected to slightly cool down. Although the monthly export volume from June to August is generally around 300000 tons, after all, the monthly export volume has increased compared to the previous few months with over 100000 tons. The increase in export quantity has led to one more point for speculation in our country, and during the concentrated collection of export orders, the domestic growth rate for a certain period of time has exceeded expectations, such as the daily increase of urea in early August and early September, which exceeded 100 yuan.
Nowadays, after seeing the data of 1.19 million tons of exports in September, exports decreased by approximately 630000 tons in October. In addition to the extension of the legal inspection on November 8th, exports from November to December and even January next year will continue to significantly decrease. During this period, the amount of urea left in China will increase, and there will be no support for exports in the short term. Without the big factor that can be hyped about exports, it seems that there is no need for industry insiders to worry too much about the shortage of reserves.
Surprisingly, the winning prices in September and October were basically the same, with prices ranging from $404 to $405 per ton (CIF) on the East Coast. Since the beginning of October, the international urea prices have also gradually decreased on a weekly basis. Our legal inspection has been extended to reduce exports, which can also be considered an opportunity to reduce low-priced exports to other countries. Especially as of November 17th, the export guidance price of small particle urea in China has increased by about $9/ton compared to the previous week, which seems to be related to our extension of legal inspection and reduction of low-priced exports. Of course, it is still uncertain whether other countries will be assisted with urea in the future.
Message 3: In order to alleviate the impact of the centralized construction of fertilizer reserves this year on the current fertilizer market, relevant departments are studying and adjusting the assessment requirements for the third and fourth months, while the requirements for light storage have been reduced.
Secondly, domestic industrial power plants, plate factories, and compound fertilizer factories continue to purchase according to demand, and it is crucial for the storage companies in the national light storage bidding to receive a large number of goods for inspection. Against the backdrop of the relaxation of the light storage inspection, it has indeed cooled our current prices that exceed expectations. For example, in recent days, factory quotations in Shandong, Lianghe, Shanxi, and other places, as well as wholesale prices in Linyi and Guangdong, have moderately decreased. Some factory quotations have fallen by over a hundred yuan.
Message 4: On the morning of November 17th, the China Nitrogen Fertilizer Association organized a natural gas supply and demand docking meeting for gas head nitrogen fertilizer enterprises, advocating that gas head urea enterprises start construction as much as possible and postpone the start of winter maintenance as much as possible.
Once again, the current daily production of urea is about 175000 tons. Originally, most of the gas head urea enterprises in southwestern Inner Mongolia will enter the winter maintenance period in early December, but there are certain uncertainties now. One possibility is that the maintenance time will be delayed and the maintenance duration will remain unchanged. Therefore, there is a high probability of urea price reduction and spring price increase; Another possibility is that the maintenance time will be delayed, but the completion time of the maintenance is similar to previous years, so now that urea prices are reduced, the uncertainty in spring will be even greater.
Anyway, how much longer can it go down? How much more can it be reduced? It is estimated that the price can decrease for a slightly longer period of time, with a slow decline and a fast decline and a fast stability. If there are export and gas head enterprises undergoing winter maintenance periods or during the monthly low storage inspection, they may also recover as appropriate.
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