Wheat and corn prices have fallen one after another recently, which has lowered market sentiment. On the other hand, as grain prices weaken, everyone is paying attention to planting costs.

This year’s planting costs are not low. Although the trend of urea, which is a benchmark for the fertilizer market, has dropped a lot compared with the same period last year, it is still at a high level.

However, the urea market is not full of good news; on the contrary, it is also full of bad news.

First of all, it is the dispersion of demand.

The main demand for urea is agricultural demand, but there have been some changes in the stocking of agricultural demand this year. The Spring Festival is relatively early this year, and the temperature after the year is low, which lengthens the time for fertilizer use and preparation. Traders have relatively sufficient preparation time, and the purchase time is not so urgent. This makes the purchase of urea relatively less concentrated. Therefore, Differentiated centralized demand.

At present, the top dressing of wheat in the north has basically come to an end. However, due to the influence of macroeconomics, the real estate trend is not strong, the demand for plates is not strong, the transaction of urea is sluggish, the market demand is empty, and the support is weakening.

Secondly, after the international urea price plummeted, the export advantage disappeared.

The price of urea has risen sharply in the past two years. One of the important reasons is that the international market has surged and export profits have been considerable, which in turn has driven up the domestic market.

However, since October 15, 2021, in order to ensure domestic supply, the country has implemented strict legal inspections on domestic urea exports. As a result, urea exports dropped sharply last year, but because it is still profitable, there is still a certain amount of exports quantity.

But this year, with the weakening of international bulk commodities, the international urea price has fallen off a cliff. The current international urea price has been seriously inverted with the domestic price, causing the export advantage to be lost.

According to industry insiders, at least in the first half of this year, it is almost impossible to export domestic urea.

Third, costs have been reduced and supply has increased significantly.

Since the state implemented controls on coal prices, domestic coal prices have returned to a stable state. In addition, the Ministry of Finance has issued a document that from May 1 last year to March 31 this year, a zero tax rate will be implemented on coal imports, which also played an important role in ensuring the supply and stable price of domestic coal.

A few days ago, the state issued another document clarifying that it will continue to extend the zero import tax rate for coal from April 1 to December 31, which has also made the entire coal market more relaxed.

Costs have fallen, corporate profits have been highlighted, and operating rates have increased significantly. In early March this year, the daily output of urea reached 170,000 tons, setting a new high in daily output in the past four years.

But despite a lot of bad news, urea prices are still hovering at high levels.

In February, the mainstream price of urea was 2,700-2,800 yuan/ton, but so far, it is only stable and slightly declining. For example, the price in Northeast China is still 2,750-2,800 yuan/ton; in North China, it is 2,580 yuan/ton. -2,650 yuan/ton; 2,520-2,700 yuan/ton in northwest China

The overall decrease is not large.

Why is the urea market frequently negative, but the price is still high?

On the one hand, although the current peak of agricultural demand has passed, it will enter the peak season of nitrogen fertilizer production, and there will still be some support for urea demand. Therefore, although it is currently in a demand window period, the market is still waiting and watching.

On the other hand, with the recent increase in maintenance of production companies, the daily output of urea has declined. The current daily output has fallen back to below 160,000 tons, which has also slowed down the price decline.

But in fact, the spot trend has begun to weaken, the market's bearish sentiment has increased, and the wait-and-see trend has begun to increase.

Some organizations believe that as the situation of urea supply exceeding demand continues to emerge, urea prices will move closer to the cost side. Even if urea exports are blocked throughout the year, it is not ruled out that urea prices may fall sharply during the year. to less than 2,000 yuan/ton.

Although there is still controversy about whether the market will fall below 2,000 yuan/ton, one thing is the market’s consensus, that is, the trend of urea is already weak, and the subsequent weakening of urea will be High probability event.