As is well known, urea prices remained strong in May, with factories in Shandong, Hebei, and other regions breaking through 2350 yuan/ton at one point. The two cooling periods in the middle were also not significant. Yes, you are right. In the last few days of May, those who thought it was a second cooling of urea and thought it could drop by more than 50-100 yuan/ton this time seemed to have burst again. Just now, prices dropped by 20-50 yuan/ton, and on May 28th, some manufacturers in Shandong, Shanxi, Shaanxi increased their prices by 10-20 yuan/ton.
Can this be called an increase? What are the reasons why prices are difficult to lower?

At first glance, this can be referred to as a high-level consolidation after urea manufacturers lowered prices and absorbed orders, but this price reduction is completely different from the expected slightly larger decline. Nowadays, it is increasingly difficult to expect a sustained decline for more than a week.

Firstly, there is a slight shortage of supply. The urea manufacturers who originally planned to resume production/full operation from May 20th to 25th have slower resumption progress than expected, and urea manufacturers in Shandong, Hebei, Ningxia, Sichuan and other places have unexpectedly stopped production. Although the impact of a single factory's short stop on production is not significant, it can be slightly expanded during this sensitive period when prices should have been reduced. As a result, the current price has only dropped by a few tens, and urea manufacturers have received a certain amount of orders, quickly turning into a stable, medium and small increase situation.

Moreover, in previous years, manufacturers have often placed maintenance plans during the spring and summer break in May. However, at that time, there was a slight distinction between peak and off seasons. This year, what is particularly special is that on the one hand, prices have fluctuated upwards since April, and the planned new production capacity from May to June has not been put into production, which is completely different from expectations. Industrial and agricultural buyers were forced to purchase goods according to demand and be cautious. On the other hand, due to factors such as inflation, after the Dragon Boat Festival holiday in early April, prices have not been able to fall to the psychological level of most buyers. Those urea market professionals who were originally outside the industry have already entered, making the original off-season in April not weak, and making the market slightly cooler in the second half of May, at least in late May, and also turning into a high price consolidation.

Secondly, for the time being, China's urea market is relatively independent of the international urea market. When the international market fell, we did not follow suit. Now that the international market is on the rise, we still have some expectations for the possible first round of exports in June, especially in July. Nowadays, inferring the rise and fall of urea cannot be viewed with conventional thinking. Since the expected situation of oversupply in the first half of the year did not occur, we can only look from the perspective of those who are not in the industry, such as the possibility of international price increases caused by peripheral politics and other factors, such as China's possible strategic reserves of various resources, such as the sustained strong growth of global oil demand in the next two years, and the possibility of foreign capital flowing into various futures markets such as urea futures, we can only look for possible factors that have supported the high price of urea from the details.

From a different perspective, without being able to export in large quantities, our urea prices are relatively strong. If we can export, is it possible that the first round of exports will bring better market conditions? A corresponding possibility is that if domestic prices do not drop to a certain extent, it seems difficult to restore a large amount of exports. Even if it is the end of June, India may re-enter the international market to pick up goods (India expects higher than average monsoon rainfall to drive agricultural production and economic growth).

Once again, the production of high nitrogen fertilizers started slightly later and continued for a while, even considering factors such as inflation, hot money speculation, and big capital intervention, a few dealers are also taking urea appropriately for top dressing. In recent days, ammonium nitrate has risen, and some sources claim that the production of high nitrogen fertilizers can continue to persist. The urea market has seen price increases when there is a slight fluctuation, and if it cannot rise steadily and then fall again, it is true that it has evolved from being too cautious to being a bit restless. We still hope that this sudden drop in price is really just a high-level consolidation. Otherwise, the long-awaited fertilizer market in late June/early July may see a situation of both sales and decline.

In short, discussing the supply and demand of urea alone is somewhat difficult to explain the continuous two month price trend. It can only be said that we hope to see another drop in prices after the high consolidation in the next two days, and there is also a possibility of a decrease. After all, manufacturers planning to resume production will eventually resume production. Currently, urea manufacturers are only waiting for a moderate release, so it is not too tight. In this way, the market in late June/early July can be expected.