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SunSirs: The Urea Market Rose and Fell Sharply in 2022, Reaching a New 10-year High
November 24 2022 11:39:38SunSirs(John)

Price trend

In 2022, the domestic urea market rose and fell sharply, showing a "N" - shaped upward trend. The urea market rose rapidly in the first half of the year, fell precipitously in July and August, and rose again in September. On the whole, the urea price in 2022 rose from 2,552 RMB/ton on January 1 to 2,718 RMB/ton on November 22, an increase of 6.50%. The highest point in the year was 3,275 RMB/ton, a new record high, the lowest point was 2,312 RMB/ton, and the maximum amplitude throughout the year was 29.40%.

Analysis review

From the monthly K column chart of urea in 2022, the price of urea in 2022 rose more than fell, and the annual price trend is roughly divided into three stages.

The first stage: rapid rise stage, from the beginning of the year to the middle of June.

The price of urea rose from 2,552 RMB/ton to 3,251 RMB/ton, up 27.39%. In January and February, the urea price rose by 4.78% slightly due to the favorable news of the ban on the export of Indonesian coal and the assistance to Pakistan's 150,000 ton urea export. In March, the international situation in Russia and Ukraine intensified, the domestic epidemic situation was repeated, some urea plants were stopped for a short time, the downstream demand was strong, and the urea price rose rapidly, up 11.44% in a single month. The urea fluctuated in a narrow range in April. It was difficult to ship, supply and demand were mismatched between regions, and prices were in chaos and deadlock. In May and June, urea prices rose rapidly again. The inventory of urea enterprises was low and the supply was tight. The downstream agricultural demand was good, the industrial demand was supportive, In addition, the export was favorable, and the urea price had broken new historical highs. In the middle of May, the urea price broke through 3,200 RMB/ton, reaching a peak of 3,275 RMB/ton, a new record high in the past decade.

The second stage: cliff falling stage, from the middle of June to the end of August.

The price of urea dropped 26.18% from 3,251 RMB/ton to 2,400 RMB/ton. In late June, fertilizer preparation in summer was completed successively, and agricultural demand in the downstream was weakened. In July and August, urea entered the seasonal low demand season, and agricultural demand was insufficient. Industrial demand was dominated by rigid demand. Urea fell 20.90% in two months. Some urea enterprises began to overhaul, and the daily urea output decreased from about 170,000 tons to about 140,000 tons.

The third stage: shock rising stage, early September to late November.

The price of urea rose from 2,400 RMB/ton to 2,718 RMB/ton, up 13.25%. In September, the prices of liquefied natural gas and anthracite rose sharply, with strong cost support. The price of urea rose by 6.46% in a single month. In October, domestic demand was sluggish, the supply of urea exceeded the demand, and the price of urea fell slightly by 1.92%. In November, the national reserve of agricultural winter storage was fully launched, industrial demand also increased slightly, export orders were orderly promoted, and some gas head urea enterprises began to repair. The daily output of urea decreased, and the shipment of superimposed urea was blocked, the price of urea rose 8.46%.

Market outlook

In the first half of 2023, the urea market may mainly rise in shock.

On the cost side: the coal price is affected by the national macro-control, and the price continues to consolidate at a high level. The LNG price may fluctuate, but the impact on the urea price is relatively small.

Demand side: agricultural demand is sufficient, and industrial demand is good. The first half of the year is the peak season for urea demand. Under the influence of global food security, the domestic grain planting area increases steadily and the demand for urea increases.

In terms of export: from January to October 2022, the urea export was 1.9242 million tons, a decrease of 2.8341 million tons compared with 4.7583 million tons last year, a year-on-year decrease of 59.56%. The implementation period of urea export legal inspection will be extended to April 30, 2023, and may continue to be extended upon expiration. Although the export of urea decreased significantly, the domestic urea export showed a phased growth under the influence of Indian bidding, international assistance and other factors.

On the whole, under the influence of multiple factors such as strong urea cost support, good agricultural demand, and phased increase in exports, the urea market may mainly rise in the first half of 2023 in shocks.

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