China’s Urea Market to Develop Stably in 2H
Year:2019 ISSUE:22
COLUMN:AGROCHEMICALS
Click:122    DateTime:Dec.03,2019


By Li Dandan, China National Chemical Information Center


China’s urea market developed soundly in the first half of 2019. Output was up, but domestic demand fell due to the policy of zero growth in fertilizer use. However, supply and demand remained balanced because of soaring exports.


Output grew slightly

   China’s urea output was up 2% YoY to 25.72 million tons in the first half of 2019 (see Figure 1 for details). Urea prices remained high, but operating rates were low.


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Figure 1  Domestic urea output in 1H 2018 and 1H 2019


Exports surged, but imports declined

   China exported 1.77 million tons of urea in the first six months of 2019, soaring 151.1% YoY from last year’s 704 kt. The products were mainly sold to India (531 kt), South Korea (274 kt), Bangladesh (261 kt), Australia (156 kt) and North Korea (87 kt).
   Import volume was down 25.2% YoY from 139 kt in 1H 2018 to 104 kt in 1H this year, and is forecast to remain small in 2H 2019. Table 1 shows China’s import and export of urea in 1H 2019.

   Table 1   China’s import and export of urea in 1H 2019

Import volume (kt)

Import value (million US$)

Export volume (kt)

Export value (million US$)

January

0.3

0.27

589

185.3 

February

0.0

0.07

394

115.6 

March

0.1

0.09

325

101.1 

April

42.7

9.24

98

29.4 

May

60.8

16.46

216

66.4 

June

0.2

0.15

145

44.0 


Urea prices increased first, and then decreased

   Urea prices fluctuated from RMB1 800/t to RMB2 100/t in 1H, when averaging prices were the highest in recent years. Farming needs pushed urea prices to nearly RMB2 100/t in January-April, and then the prices fell to around RMB1 900/t in June. Some urea producers switched to producing liquid ammonia due to soaring prices of nitrogen fertilizers.


Urea market is to develop stably in 2H

   Urea demand is mainly from agriculture and off-season reserves. In addition, urea can be used as industrial raw materials to produce compound fertilizers, sheet materials and melamine, and used in denitration in the electric power sector. Agricultural demand for urea is forecast to decrease by over 40% in the second half of 2019. Urea consumption is forecast to fall in both sheet material and melamine sectors, but to increase in the electric power sector. There will be no big differences in urea consumption in the compound fertilizer sector. Hence, industrial demand for urea is to be stable. Dealers are unlikely to store a large number of urea in off season as those with high inventories suffered losses last year.
   Increasingly stringent environmental protection policies are to lower operating rates of fertilizer plants, especially in the fourth quarter, when many fertilizer plants using natural gas as raw materials are to suspend production. These factors may decrease fertilizer output in the last three months. The urea market is forecast to be stable given decrease in both output and demand.