Urea risk is greater than chance

After the return of the “May Day” holiday, the domestic urea market was still dull. The long-lost market had already been forgotten by the industry. If the looming agricultural summer fertilizer demand failed to start, the urea price still showed a significant decline. As a whole, weak demand in the north, Hebei, Shandong, the mainstream ex-factory price is only 1400-1430 yuan / ton, Shanxi and local regions, the actual transaction price is even lower. Although the demand in the south has improved, it is also easy to stabilize and increase. In view of the current situation, the preparation of fertilizers in the summer may support the market in the later period; urea exports are still underway, but due to foreign prices, the Chinese FOB price in early May has dropped to 283-287 USD/ton. From this, it is estimated that the latest set price of the northern factory is only 1,475-1500 yuan / ton, such an export price in a sense is not as good as domestic sales. However, the fact is that since the continuous decline in the price of urea in the domestic market, the dealer’s psychological endurance has been hit hard, and the practice of whipping up the board at any time before could not be seen. As everyone's understanding of the overcapacity is deepened, the market is allowed to be fiddled with speculators in various situations, and the market feedback is just wait-and-see.

Since ancient times, businessmen have been profit-oriented. I remember that there was a similar statement in Capital. Although the subject describes the capital, it is not a bad idea to extend it to buying and selling. A simple understanding is that the courage of businessmen grows with the increase of profits. “If there is a 10% profit, businessmen will use it everywhere; with 20% of profits, businessmen will become more active; with 50% of profits, businessmen will take risks; for 100% of profits, businessmen will dare to trample on all human laws. There is a 300% profit..." When this comes, perhaps someone has already thought of preparing fertilizer in the summer. The author is untimely to ask: How much profit can you see in this wave of summer market? Perhaps not even 10%. Looking back at risks, the remarkable negative factors are numerous. At this point, the dealer is willing to wait and see, until the use of fertilizer with the purchase and then sold more secure.

According to foreign media reports, the international urea price at the beginning of this month is still shrinking, and the trend may continue to decline. Which China's urea FOB price has dropped to 283-287 US dollars / ton. According to the author's understanding, due to the low price quoted by foreign investors, the cost of the port's early inventory was high, and the recent foreign trade showed a state of pricelessness and no market. At present, the search prices of large companies' ports are basically set at 1,515 yuan/ton, or 1,475 yuan/ton, and the domestic ex-factory price is only 1,400 yuan/ton. In addition, July-October urea exports will implement off-season tariffs, while attracting attention from some international buyers, but also give the price part of the game space. In fact, both the tariffs for the peak season and the off-season tariffs are the same for domestic urea manufacturers. Due to excessive supply and demand, the company used the FOB price as a benchmark for domestic sales, but now it uses the domestic sales price as a benchmark for exports. In other words, the ex-factory price is still low, and off-season tariffs will only allow urea FBM prices to continue to decline.

To sum up: for China's July-October urea tariff policy implemented in the off-season, foreign prices are more obvious intentions. In other words, some traders are already talking about orders for the shipping period in July, and on the ground of lowering taxes, they are expected to trade the FOB price to US$260/ton. At that time, exports do not represent profits, and they are more likely to exist in order to absorb the excess urea output in the country. Looking back at the domestic market, summer fertilizer preparations will be postponed and dealers will wait and see. In view of the overall supply and demand of domestic urea is still expected to be surplus, businesses seem more willing to go with the purchase. After all, the gambling market is based on ample profits. Therefore, in the first half of May, under a more optimistic scenario, the urea price was temporarily determined on a steady basis. The mainstream ex-factory prices in North China and East China were around 1400 yuan/ton. Moreover, such market predictions must also be limited to the condition that the company's operating rate is 65% and the off-season urea off-season price is not less than US$280/tonne off-shore contract price.