Urea cost support price policy affects supply and demand market
In 2007, the urea market took on a strong trend in previous years and showed a relatively strong state. In particular, the situation in the fourth quarter was buoyant and the price rose. The price hit a new high in the same period in recent years. It is expected that in 2008, the urea market will continue to show a better trend, prices will be running at relatively high levels, and market demand will be positive, but the contradiction between production and demand will increase.
In 2007, due to the well-established state of the old equipment and the continuous increase of new installations, China’s urea production showed a rapid growth. The country’s total production was estimated at more than 52 million tons, hitting a record high; the market trend showed unusual “prosperity†In the April-July season, the urea price did not rise and fell, and the urea price in the off-season in the fourth quarter rose as if the drylands were pulling onions. In addition, due to increased demand, rising prices of crude oil and natural gas, and increased production costs of urea, international urea prices have risen sharply, pushing domestic urea exports to break the 4 million-ton mark and set a record high.
In the traditional sense, urea has always been called the “leader†of the fertilizer market due to its large demand and large amount. Its market trend and price fluctuations often have greater influence on other fertilizers, especially nitrogen fertilizers. However, in 2007, this situation has undergone major changes, and the "leader" role of urea has dropped significantly. In June and July last year, the price of urea fell sharply, while the prices of monoammonium phosphate and diammonium phosphate rose; while the prices of other nitrogen fertilizers such as ammonium bicarbonate and ammonium chloride fell, the decline was far less than that of urea. .
The main reason for this situation is that the production of urea increased rapidly last year, and the contradiction between production and demand was relatively large. The contradiction between the production and demand of other varieties of fertilizers is not as large as that of urea, and there is no abnormal situation. In 2008, the demand for urea market will be improved, but there is little room for resolving the contradiction between production and demand. Relatively speaking, the market situation in the first half of the year should be better than the second half of the year.
Specifically, the domestic urea market in 2008 is expected to exhibit the following characteristics:
First, the contradiction between production and demand is further aggravated, but there is no serious situation of oversupply. According to statistics from China Nitrogen Fertilizer Association, China's urea production capacity will exceed 60 million tons by the end of 2008, and the annual urea production is expected to exceed 55 million tons. In terms of demand, the strengthening of the basic supply guarantee for agricultural products, the continuous decline in the use of ammonium bicarbonate, and the rapid development of high-nitrogen compound fertilizers will all increase the demand for urea. It is expected that the domestic demand for urea will increase by about 6% in 2008. In addition, in recent years, the main downstream industries such as industrial urea, sheet metal, melamine, etc., have developed rapidly, and it is expected that in 2008 it will still maintain a growth rate of more than 10%.
Second, prices will remain relatively high. There are three main reasons: regardless of the ex-factory price or the wholesale market price, the end of last year hit a new high in the off-season in recent years. The urea starting price is so high this year, and the average price for the whole year is not expected to be too low; the current international oil price is as high as 90. Due to the effect of parity, the price of coal will still rise steadily this year, and the price of fertilizer gas will also rise slightly, making the production cost of urea continue to increase; this year, the state still implements the lowest levels of major grain varieties such as wheat and rice. Protection price acquisition, which will also form a certain support for the price of urea.
Third, the export in the off-season is curbed. At the end of last year, the Ministry of Finance introduced a new urea export tariff policy: The average tariff for the entire year of 2008 was 31.25%, which was an increase of 5 percentage points from 2007. Overall, this year, the country’s export of urea has tightened, especially in the off-season in the fourth quarter, which has increased by 10% to curb the export of urea in the off-season and protect domestic supplies and the need for light storage.
Fourth, policy factors have increased the impact on the urea market. The direct reason is that fertilizer prices rose sharply in the second half of last year. For the protection of farmers' interests and the consideration of stabilizing agricultural production, it is expected that government departments will increase supervision over the price of agricultural materials this year, and urea, as a leading species in fertilizers, has always been a key target. On the other hand, it is expected that the government will increase the overall direct subsidies for agricultural resources so as to reduce the impact of the substantial increase in agricultural capital prices on agricultural production and farmers' income increase.
Fifth, the market consolidation will be further strengthened. In recent years, the polarization in China’s urea production enterprises has become more apparent. Under such circumstances, it is inevitable for the dominant urea companies to integrate, reorganize, and acquire mergers and acquisitions for the inferior urea companies. There have been many successful cases in this area in the past few years, and this year's consolidation efforts are expected to increase further. This integration is not only reflected in the integration of production companies by production companies, but also in the integration of circulation companies with circulation companies and the integration between circulation companies and production companies.
Of course, when analyzing the urea market, we should also pay attention to the general environment of the national economy this year. One of the important reasons for the sharp rise in urea prices in the fourth quarter of 2007 was the increase in overall prices. In this context, the increase in fertilizer prices, especially urea, is not very large. In addition, we must pay close attention to the trend of other fertilizer varieties. Although the role of the “leader†in the urea market is now declining, the fertilizer market has a certain degree of interlinkedness and there is a certain degree of correlation and influence among the varieties.
In 2007, due to the well-established state of the old equipment and the continuous increase of new installations, China’s urea production showed a rapid growth. The country’s total production was estimated at more than 52 million tons, hitting a record high; the market trend showed unusual “prosperity†In the April-July season, the urea price did not rise and fell, and the urea price in the off-season in the fourth quarter rose as if the drylands were pulling onions. In addition, due to increased demand, rising prices of crude oil and natural gas, and increased production costs of urea, international urea prices have risen sharply, pushing domestic urea exports to break the 4 million-ton mark and set a record high.
In the traditional sense, urea has always been called the “leader†of the fertilizer market due to its large demand and large amount. Its market trend and price fluctuations often have greater influence on other fertilizers, especially nitrogen fertilizers. However, in 2007, this situation has undergone major changes, and the "leader" role of urea has dropped significantly. In June and July last year, the price of urea fell sharply, while the prices of monoammonium phosphate and diammonium phosphate rose; while the prices of other nitrogen fertilizers such as ammonium bicarbonate and ammonium chloride fell, the decline was far less than that of urea. .
The main reason for this situation is that the production of urea increased rapidly last year, and the contradiction between production and demand was relatively large. The contradiction between the production and demand of other varieties of fertilizers is not as large as that of urea, and there is no abnormal situation. In 2008, the demand for urea market will be improved, but there is little room for resolving the contradiction between production and demand. Relatively speaking, the market situation in the first half of the year should be better than the second half of the year.
Specifically, the domestic urea market in 2008 is expected to exhibit the following characteristics:
First, the contradiction between production and demand is further aggravated, but there is no serious situation of oversupply. According to statistics from China Nitrogen Fertilizer Association, China's urea production capacity will exceed 60 million tons by the end of 2008, and the annual urea production is expected to exceed 55 million tons. In terms of demand, the strengthening of the basic supply guarantee for agricultural products, the continuous decline in the use of ammonium bicarbonate, and the rapid development of high-nitrogen compound fertilizers will all increase the demand for urea. It is expected that the domestic demand for urea will increase by about 6% in 2008. In addition, in recent years, the main downstream industries such as industrial urea, sheet metal, melamine, etc., have developed rapidly, and it is expected that in 2008 it will still maintain a growth rate of more than 10%.
Second, prices will remain relatively high. There are three main reasons: regardless of the ex-factory price or the wholesale market price, the end of last year hit a new high in the off-season in recent years. The urea starting price is so high this year, and the average price for the whole year is not expected to be too low; the current international oil price is as high as 90. Due to the effect of parity, the price of coal will still rise steadily this year, and the price of fertilizer gas will also rise slightly, making the production cost of urea continue to increase; this year, the state still implements the lowest levels of major grain varieties such as wheat and rice. Protection price acquisition, which will also form a certain support for the price of urea.
Third, the export in the off-season is curbed. At the end of last year, the Ministry of Finance introduced a new urea export tariff policy: The average tariff for the entire year of 2008 was 31.25%, which was an increase of 5 percentage points from 2007. Overall, this year, the country’s export of urea has tightened, especially in the off-season in the fourth quarter, which has increased by 10% to curb the export of urea in the off-season and protect domestic supplies and the need for light storage.
Fourth, policy factors have increased the impact on the urea market. The direct reason is that fertilizer prices rose sharply in the second half of last year. For the protection of farmers' interests and the consideration of stabilizing agricultural production, it is expected that government departments will increase supervision over the price of agricultural materials this year, and urea, as a leading species in fertilizers, has always been a key target. On the other hand, it is expected that the government will increase the overall direct subsidies for agricultural resources so as to reduce the impact of the substantial increase in agricultural capital prices on agricultural production and farmers' income increase.
Fifth, the market consolidation will be further strengthened. In recent years, the polarization in China’s urea production enterprises has become more apparent. Under such circumstances, it is inevitable for the dominant urea companies to integrate, reorganize, and acquire mergers and acquisitions for the inferior urea companies. There have been many successful cases in this area in the past few years, and this year's consolidation efforts are expected to increase further. This integration is not only reflected in the integration of production companies by production companies, but also in the integration of circulation companies with circulation companies and the integration between circulation companies and production companies.
Of course, when analyzing the urea market, we should also pay attention to the general environment of the national economy this year. One of the important reasons for the sharp rise in urea prices in the fourth quarter of 2007 was the increase in overall prices. In this context, the increase in fertilizer prices, especially urea, is not very large. In addition, we must pay close attention to the trend of other fertilizer varieties. Although the role of the “leader†in the urea market is now declining, the fertilizer market has a certain degree of interlinkedness and there is a certain degree of correlation and influence among the varieties.
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