Urea trend weakens in April

In April, the urea market in China continues to show weakness, driven by both domestic and international factors. According to data from the National Bureau of Statistics, total urea production in January and February 2013 reached 10.488 million tons, up 2.8% year-on-year. With natural gas supply returning to normal in the southwest and northwest regions, production capacity in Xinjiang, Gansu, and Sichuan has significantly improved. This suggests that total urea output for the first quarter could surpass 17 million tons. However, demand during the spring planting season was weak, with agricultural demand remaining flat and prices fluctuating between East and North China. The "cold winter" and changes in fertilizer structure further dampened sales, leading to lower-than-expected performance. The Northeast market remained inactive, and no major price increases were observed. Originally, higher nitrogen fertilizer production was expected to support the market, but many small compound fertilizer plants had already consumed this demand, making it difficult to sustain growth. Additionally, some companies had placed advance orders, but due to the high price of HK$2,150/ton, they ended up without actual orders. By the end of the first quarter, a slight oversupply emerged, causing ex-factory prices in Shandong, Hebei, and Shanxi to drop to RMB 2,030–2,050 per ton. Internationally, the urea market also showed signs of weakness. Export hopes were not enough to offset the domestic downturn. Recent observations indicate that international demand is affected by weather conditions, with delayed purchasing periods. In the U.S., heavy snowfall led to a shift from corn to soybeans, reducing urea demand. Corn prices fell by 6%, impacting overall fertilizer needs. At the same time, export prices remain high, making them unattractive to international buyers. This has contributed to a general decline in international urea prices over the past two weeks. Buyers in India, Latin America, and other regions are holding off on purchases, as they still have inventory from earlier periods. New tenders from Pakistan are also being approached cautiously, with buyers waiting for more clarity. Looking ahead, April may bring clearer signals. Jigang and agricultural fertilizer markets may see coordinated arrangements, and the spring plowing season has been disappointing. Some distributors are now preparing for summer fertilizers, reflecting a shift in operational strategies. This adjustment shows a limited understanding of how agricultural fertilizer demand might be spread out over the year. If spring usage is reduced, it can potentially be compensated for in the summer or autumn. With the implementation of a 2% low tariff on urea exports from July to October, and given that exports in January–February reached 614,000 tons, there is a strong incentive to expedite shipments before the tariff increase. Additionally, India, Latin America, and Pakistan are set to conduct their first round of bids this April, which could clarify the international price trend. If the market accepts an FOB price of $365 per ton for urea in Europe, Chinese ex-factory prices could reach around RMB 2,100 per ton, potentially triggering new trading activity in Hong Kong. This may lead to overlapping periods of catch-up and summer preparations. Overall, urea prices have been declining due to weak domestic demand and trade conditions. However, with the end of month-end promotions, ex-factory prices during the Qingming holiday period may stabilize. After that, attention should focus on the international market. If European buyers accept FOB prices of $365–370 per ton, Chinese urea prices could rebound in mid-April.

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