Urea resources decline this spring, localized supply may tighten
Recently, the "2015 Spring Nitrogen Fertilizer Market Situation Analysis Meeting," hosted by the China Nitrogen Fertilizer Industry Association, was held in Beijing. The meeting predicted that nitrogen fertilizer production and sales will improve in 2015, but because market resources have decreased significantly this spring, local markets may face tight supply.
Gu Zongqin, chairman of the China Nitrogen Fertilizer Industry Association, pointed out in a keynote report titled "Do Everything Possible to Supply Fertilizer for Spring Plowing and Strive to Guarantee Agricultural Production" that this year's nitrogen fertilizer overcapacity will ease somewhat, agricultural demand will remain stable, industrial demand will increase, and export space will expand, so spring nitrogen fertilizer production and sales are expected to face a relatively good situation.
According to statistics from the China Nitrogen Fertilizer Industry Association, this year's resource volume has decreased by about 10% year on year. Data show that in 2014 urea output decreased by 1.15 million tons year on year, export volume increased by 5.35 million tons, and full-year supply decreased by 6.36 million tons year on year. Consumption, however, increased by 1.5 million tons year on year. In 2014, not only was the previously accumulated inventory consumed, but most of the urea that should have been carried over to 2015 was also used up. On the demand side, urea agricultural demand in 2015 is expected to remain stable, while industrial demand is expected to maintain a growth rate of 6% to 8%. It is estimated that industrial demand for urea in 2015 will be 16 million tons, an increase of 1 million tons year on year. The main increase comes from artificial boards, flue gas denitrification for thermal power and cement, automotive urea, and so on. It is understood that a similar significant reduction in resource volume also occurred in the spring of 2011, and urea prices began to recover that April.
Su Jianying, director of the Industrial Development Department of the China Nitrogen Fertilizer Industry Association, believes that reduced turnover in intermediate links and improved logistics efficiency will also become a new normal affecting the nitrogen fertilizer market. It is understood that in the Northeast, Northwest, North China, South China, and other regions where spring fertilizer use is relatively concentrated, low social inventories and somewhat tight market supply and demand have already appeared to varying degrees.
Su Jianying said that as the marketization process accelerates, preferential policies on taxes, gas prices, electricity prices, and transport prices are expected to be adjusted to a certain extent in the future, which will lead to a substantial increase in nitrogen fertilizer production and distribution costs. Judging from the current raw material market, spring raw material coal prices remain stable, and costs for coal-based enterprises have changed little. Starting April 1, existing gas and incremental gas will be merged into one track, which will cause costs for gas-based nitrogen fertilizer enterprises to rise further.
Regarding international urea prices, which the industry generally follows closely, CRU senior analyst Ju Hao expects international market prices to find a bottom in the second quarter and fluctuate at a low level, then enter a rebound around July. He also said that from 2015 to 2017, newly added international urea production capacity will enter a period of rapid release, so China's market share in international urea trade will face more international competition in the next 1 to 2 years, and high-cost production capacity will face exit and consolidation.
At the meeting, leaders from relevant ministries and commissions and industry associations, including the National Development and Reform Commission, the Ministry of Agriculture, the Ministry of Industry and Information Technology, the Ministry of Finance, and the Ministry of Commerce, as well as more than 300 representatives from fertilizer enterprises and industry media, conducted in-depth exchanges and discussions on topics such as spring nitrogen fertilizer market trends, marketing model innovation, and international market development.