The domestic compound fertilizer market remained tense in late December. During the first half of the month, the market grappled with persistently rising raw material costs and tight supply. Following policy announcements, the heightened market sentiment cooled, leading to a stalemate. What lies ahead for compound fertilizer?

Winter Stockpiling Drives Early Price Gains

Comparing the price trends of compound fertilizers during the winter stockpiling periods of the past three cycles, this year's characteristics are distinct: First, prices have risen significantly compared to previous periods. Taking the average price of 45% sulfur-based compound fertilizer as an example, the price on December 22 was 3,153 yuan (per ton, same below), up 270 yuan or 9.37% from 2,883 yuan on November 1. Second, prices have reached a three-year high, with the current average exceeding last year's level by 425 yuan. Third, winter stockpiling progress in Northeast China has accelerated compared to the same period last year.

However, this cycle's price increase is driven by rising raw material costs. While enterprises must absorb these higher expenses, they also face the reality of order prices falling below production costs. Following supply guarantee meetings for sulfur, sulfuric acid, and monoammonium phosphate, procurement of compound fertilizer raw materials may become less challenging, though cost reductions will take time.

Among key compound fertilizer raw materials, urea prices have recently seen a slight increase and are likely to fluctuate within a narrow range going forward, with limited volatility and lower risk. Domestic potassium chloride prices remain stable, though market supply is somewhat tight; once supply eases, prices are expected to stabilize. Industry focus remains on monoammonium phosphate trends. Despite recent declines in sulfur and sulfuric acid prices, phosphate fertilizer cost pressures remain significant. With no major cost adjustments anticipated, prices are expected to consolidate in the near term.

Overall, for compound fertilizers, upstream nitrogen, phosphorus, and potassium markets are expected to stabilize. Therefore, based on raw material costs, enterprises are unlikely to adjust quotations lightly.

Pre-sales progress is favorable; shipping status is under observation

This autumn's compound fertilizer market concluded later than usual, compressing the winter stockpiling cycle. Coupled with post-November price increases, compound fertilizer enterprises have achieved solid progress in advance payments for winter reserves. Reportedly, well-performing enterprises have collected 70%-80% of payments, with subsequent efforts focused on promoting shipments. Market shipments remained decent before mid-December, but following policy announcements, market sentiment turned cautious and shipments slowed.

Data indicates declining capacity utilization rates alongside rising inventories, reflecting shipping pressures faced by manufacturers. With the Spring Festival falling in mid-February next year, market activity will likely slow around that period. Consequently, companies will actively promote shipments from late December to January, potentially implementing shipping incentives alongside stable pricing.

Short-term firmness, medium-to-long-term narrow consolidation

Downstream winter stockpiling demand continues to release, though regional variations exist and weather impacts warrant attention. Considering cost, supply, and demand factors, short-term high costs for compound fertilizers require digestion, maintaining price firmness. Medium-to-long-term, if shipments persistently lag, localized price softening cannot be ruled out.

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