From the scene of China's smart agricultural materials summit, it is expected that by 2018, domestic urea production capacity will exit 4 to 5 million tons, or domestic production and sales will be balanced, and the domestic market situation will also undergo historic changes.
Continued decline in production and production capacity and increased concentration
After undergoing a rapid decline in market prices in 2016, part of the domestic medium- and low-end production capacity withdrawn from the market in 2017, and the production capacity of ammonia fertilizer and urea, two major types of nitrogen fertilizers, has decreased. In 2017, the domestic urea capacity and output continued to decline, and the concentration increased. The main reasons for this are the high production cost and the increase in production cuts and production cuts; the second is the decline in domestic demand for agriculture and industry, the difficulty in exporting, and the unwillingness of enterprises to increase their output; third, the company's initiative in converting high-profit liquid chemicals such as liquid ammonia and methanol. , reducing the physical supply of urea.
Although the industry situation is still grim, the overall nitrogen fertilizer industry in the first half of 2017 has seen a marked improvement. The sharp increase in coal prices led to rising production costs and ex-factory prices. Some companies stopped producing for a long time and reduced production. The operating rate was at historically low levels. At the same time, the profitability of other coal chemical products is relatively high, and some of the production capacity is more inclined to it, which increases the profitability. It is understood that in the first half of 2017, the urea ex-factory price (ton price, the same below) rose by about 240 yuan compared with the same period of last year, an increase of 18%, and the average ex-factory price reached 1,560 yuan. Among them, coal costs played a major role in supporting the ex-factory prices.
Internationally, with the rapid release of new production capacity represented by the United States, all of them have taken over the traditional market of Chinese sources of supply. China's supply is subject to cost and it has been difficult to dock with international prices. China has gradually been marginalized by the international urea market.
Single fertilizer is no longer strong, liquid fertilizer prospects are promising
With the completion of the previous production projects, the new production capacity in 2018 will be greatly reduced compared with the previous two years. According to the forecast of authoritative departments, urea demand will not increase significantly in 2018. The United States and India, two major urea-importing countries, are destined to reduce their imports. Under the situation where the contradiction between supply and demand is becoming increasingly serious, the future international urea industry will be the same as China. Enter the production phase.
Exports will no longer serve as the main force for stocks digestion. China's supply will be mainly concentrated in the domestic market. It is expected that China's exports will remain low this year. In the international market in 2018, with the increase of urea production, and the weakening of demand from urea-importing countries such as the United States and India, the gap between supply and demand in the international market will further widen. At the same time, in the case of sufficient supply and reduced liquidity, the international trade volume of urea will decrease, and urea prices will remain low. The market is still the buyer's market, and the competition among suppliers will become increasingly fierce. China will also change the positioning of urea-exporting countries and participate in the international market as a regulator of international urea price balance.
At the beginning of 2018, the domestic withdrawal capacity will reach 400-500 million tons. Some production enterprises will no longer have production conditions, or will basically achieve domestic production and sales balance.
With regard to the future pattern of the domestic fertilizer market, historical changes have taken place in the fertilizer market in China. The decline in the demand for traditional fertilizers such as nitrogen fertilizers has become inevitable, and international fertilizer consumption is also developing in the direction of high concentration, compounding, liquefaction, and sustained release. Small nitrogen fertilizers such as ammonium sulfate, ammonium chloride and other products rely on price advantage, will further replace some of the urea dosage. Liquid fertilizer has many advantages such as high nutrient content, high crop absorption rate, low production cost, safety and environmental protection, flexible formulation, and so on, and its consumption will also grow rapidly.