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Urea Prices in China Moving Downward Due to High Inventory Level

Urea Prices in China Moving Downward Due to High Inventory Level

Urea Prices in China Moving Downward Due to High Inventory Level

  • 22-Feb-2022 12:51 PM
  • Journalist: Nina Jiang

Urea prices plummeted late Friday in the Chinese market after the National Development and Reform Commission issued a notice on many initiatives to boost the industrial economy's stable expansion on February 18. Last week, the Urea market saw plentiful supplies and sluggish demand. In the short term, the supply side mostly operated at a high level under the guidance of national policies. The current fundamentals of Urea have not changed significantly but given the state's strategy of "ensuring supply and stable pricing" in the fertilizer industry, prices fell last week, indicating negative sentiment. As per the ChemAnalyst database, FOB Qingdao offers on 18 February were reported as USD 477/MT.

Last week, the aggregate production-to-sales ratio of Urea firms was 97.9% which led to the increase in Urea inventory levels roughly by 7.96 % over the previous week, reaching 705,000 tonnes. The current downstream demand, however, has not been met. Industry's inability to sell fresh orders has led to inventory accumulation. Based on prior years' seasonality, Urea industries' inventory may reach an inflection point in the next 1-2 weeks, but there are other factors influencing the current market, and it is critical to be conscious of the impact of external factors on seasonal inventory variations.

As per ChemAnalyst, “it is expected that the demand-supply imbalance is likely to be resolved by next week. With the anticipation that downstream firms' output levels will improve after the Winter Olympics, the rigid demand for Urea may gradually increase. However upstream commodities coal and natural gas prices are affected by the geopolitical tension between Russia and Ukraine. Also, Domestic spring ploughing may be delayed because of the recent cold temperatures in several parts of the nation, which are not beneficial to crop development, resulting in a lag in agricultural fertilizer preparation activities. The compound fertilizer industry's operating rate has increased dramatically in terms of industrial demand. Although there is some support for Urea's demand. On February 20, the Beijing Winter Olympics will conclude, and certain downstream enterprises may hope to grow in the last stages of restricted start-up”

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