Fertilizer winter storage has begun, so why is progress slow?

As the year draws to a close, this year's winter storage has officially begun. At the same time, the "2015 Tariff Implementation Plan" issued in mid-December explicitly abolished the off-season and peak-season window tariffs, leading most fertilizer enterprises to take an optimistic view of next year's fertilizer export situation. This has caused the long-sluggish urea market to rise.

At present, the boost that winter storage gives to market confidence has already become apparent. At the beginning of this month, the ex-factory price of urea in the Shandong region was 1460-1500 yuan/tonne, and it has now risen to 1530-1560 yuan/tonne. In addition, Yang Tongyu, assistant to the general manager of Henan Jinkai Group Yanhua Chemical Co., Ltd., said that, boosted by the favorable tariff policy and the launch of winter storage, urea prices in Henan recently rose by 40-50 yuan/tonne, with mainstream ex-factory prices climbing to 1530-1540 yuan/tonne.

Regarding the new tariff policy, an analyst predicts that although it has no direct impact on this year's winter storage, it may affect domestic fertilizer supply and demand next spring. According to statistics, from January to November this year, domestic urea exports reached 12 million, a record high. The abolition of the peak-season window this time means enterprises have one more way to ease overcapacity, and it is expected that next spring the domestic surplus urea capacity will be further consumed.

⟦NL> Although winter storage has begun, reserves are progressing slowly. In recent years, shrinking domestic winter storage profits have made grassroots dealers increasingly inclined to wait and see, and at present some enterprises are still mainly fulfilling earlier orders, with new orders concluded slowly and most supply concentrated in the hands of large dealers. As fertilizer for spring ploughing is still some time away, large dealers are currently shipping at relatively high prices, and grassroots purchasing enthusiasm is generally modest.

With regard to the slower progress of winter storage, the primary reason is that grassroots dealers cannot make a profit from winter storage. Taking urea as an example, the winter storage purchase price is 1550 yuan/tonne; adding 40-50 yuan/tonne in freight, the interest payable during the winter storage period, labour costs, and roughly 40-50 yuan in warehousing fees, the selling price next year must be at least above 1650 yuan/tonne to make a profit. However, in recent years, urea bought for winter storage has often seen prices fall after the New Year, so the above price is basically unachievable. At the same time, with transport conditions becoming ever more convenient, many retailers have also decisively given up winter storage and instead choose to follow the market at spring ploughing time.