Urea industry profitability is inevitable

At present, the urea industry exceeds the imagination and surplus profitability is inevitable. Some dealers sold at 1800 yuan (ton price, the same below) to buy out, there is still a certain risk. The author suggests that reasonable short-term operations and joint sales of the company's federates be adopted to avoid risks.

The operating rate remains high. Statistics released by the Bureau of Statistics in April showed that from January to April this year, China's urea accumulated production of 11.0686 million tons, in kind amounted to about 24.0622 million tons, and output increased by 13.9% year-on-year. If the operating rate of the industry maintains its current level, the annual output may exceed 72 million tons. Faced with the status quo, some people will question the authenticity of the data. Judging from the past urea production links, the average annual operating rate of the industry is around 80%, and some devices have long-term parking. Why is production so large this year? I think there are two reasons: First, companies are profitable, especially in the case of coal price cuts, tons of urea sales profit has been maintained at 100 to 150 yuan, and some even more than 200 yuan. This profit margin was not significantly reduced until the ex-factory price fell below 1,850 yuan (t price, the same below) at the end of May, but it was not upside down. For companies that could only be priced close to the cost line in previous years, it is not a bad idea. The operating rate of enterprises continues to report a historical high of over 95%. Second, new production capacity is extremely active. Although there has been no increase in total domestic urea production capacity, it includes the alternation of old and new production capacities. The new installation not only added the phase-out quantity, but also expanded the total production capacity. And new production capacity has cost advantages and stronger competitiveness. In particular, a number of large enterprises in Xinjiang and Inner Mongolia even reported a set price of 1,850 yuan. The new device has become a "new force" that has pushed up the operating rate of the industry.

Summer fertilizer demand is weak. Affected by excess production, dealers who have been “failed and defeated” have been exhausted and panicked. For the lack of judgment of the agricultural market circulation business outlook or to maintain a wait-and-see attitude, or joint sales with the Federal Reserve, and even the buyout price of 1800 yuan is also difficult to mention interest. In the summer, the fertilizer market failed to start in a large area. High-nitrogen fertilizer production is nearing completion and domestic demand is further weakened. This market situation has triggered the judgment of excess supply and demand in the future.

India bids as a pricing indicator. The industry has shown a high degree of concern. After all, this is a major event related to the export of China's urea off-season. From the results, the Iranian side can provide a supply of 331.5 US dollars for the lowest CIF, remove the ocean freight of 17-20 US dollars, and China's FOB price may be between 312-315 US dollars. The total tender amounted to 4.2 million tons, with an optional amount of 2 million tons. The sources of supply are from China and Iran. If the price is pushed back to 315 US dollars FOB, China's ex-factory price of 1760 to 1780 yuan, is still regarded as support. However, from the fact that domestic ports currently have close to 2 million tons of stockpiles and can't be statistically stored around the port due to port restrictions, India's bids may have lower than expected results. However, the FOB price is often the vane of the company's pricing, and the bidding price in India may be a psychological defense line for ex-factory prices.