Urea dipstick must be carefully faced

After the May Day holiday, urea prices in several Chinese provinces experienced a sudden rebound. The increase was most noticeable in Shandong and surrounding regions, where offers rose by approximately 50 yuan per ton. However, due to previous stable sales from manufacturers, actual transactions were only around 70–80 yuan higher than before. The low-end ex-factory price in Shandong, which had previously been 1,880 yuan/ton, climbed to 1,940 yuan/ton. This rapid fluctuation between passive and active pricing left many market participants puzzled. Market observers have offered various interpretations for this price movement. Some believe that the production cuts at major companies like Shandong Luxi and Yangmei Plain have eased supply-demand pressure, allowing prices to rise. Others suggest that agricultural customers are actively purchasing to stimulate demand, which has pushed ex-factory prices higher. Additionally, some speculate that large companies with limited stock may be stocking up early for summer fertilizer needs. In short, the recent price changes feel somewhat like an afterthought—unexpected but not entirely unexplainable. Earlier in the year, the market anticipated a steady upward trend in urea prices during May. It is now expected that the ex-factory price in northern regions, particularly in Shandong, will remain within the range of 1,900–1,950 yuan/ton. While the bottom of the price decline is relatively easy to identify, predicting when a rebound will occur is more challenging. The example of urea remaining at low levels from March to August 2010 serves as a cautionary tale. At present, it's still wise to approach bargain-hunting with care, as opportunities and risks often go hand in hand. Opportunities are indeed visible. The first half of the fertilizer industry has generally struggled, with raw material prices continuing to fall. Urea, in particular, has seen a significant drop. From the end of the Spring Festival to the end of April, urea prices in key production areas in Shandong and Hebei fell by 220–260 yuan per ton. During this period, there were numerous cases of overstocked goods and miscalculations in the market. By early May, the majority of agricultural companies had reached their inventory bottom. Even leading chemical fertilizer companies like Sinofert only hold about 200,000 tons of urea, far less than in previous years. As a result, middlemen have little interest in selling or buying for export. Looking at the demand side, the summer fertilizer season is approaching, and the ex-factory price of around 1,900 yuan still seems reasonable. Internationally, the FOB price of urea from Chinese ports was recently $340, and it could fall further to $330 as predicted at the FMB meeting. Given potential export delays, domestic ex-factory prices can still be estimated at 1,900 yuan/ton. June and July are typically a low-demand period for urea, but they also mark the peak season for summer fertilizers in agriculture and industrial use. The combined demand from agriculture, industry, and exports is expected to support the market in the coming months. However, risks remain. In May alone, the domestic urea market lacked clear positive signals. The forecasted ex-factory price remains consolidated between 1,900–1,950 yuan/ton. For small-scale dealers, profit margins are slim if they don't reach 1,900 yuan. If group buying behavior emerges, it may be difficult to find liquidation opportunities within a month. Some might argue that buying at the bottom could push prices higher and create better sales opportunities. But from the current operating rates of domestic urea companies and downstream buyer sentiment, chasing prices or engaging in aggressive bargaining is likely just a strategy for manufacturers to reduce pressure—essentially a losing proposition. While I'm not suggesting we sit idle, the text would otherwise become meaningless. Instead, we must act decisively. Adjusting the amount of summer fertilizer based on current market conditions is essential. For instance, if urea production rates remain high, we should consider potential oversupply. If port inventories are too large, we need to assess the impact of export price competition on the domestic market. Beyond human factors, we must also monitor weather conditions. Many dealers made mistakes in the spring planting season, such as cold spells in the north, delayed spring in Northeast China, and droughts in Southwest China. In summary: "At the end of the season, urea can make more money, but caution leads to fewer losses."

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