Suspension of production and maintenance are difficult to solve

Guest opinion:

At present, the domestic urea market has entered a gap period, after the end of spring fertilizer, the summer market has not yet started, although the price fell below the cost of production, the domestic urea enterprises passively stop production and maintenance, but this passive shutdown maintenance is only to extend the maintenance period Or for safety reasons, there is no real abandonment of production. According to the current situation, after a brief shutdown and maintenance, enterprises with resources and technological advantages will surely start one after another. Therefore, the suspension of maintenance will not ease the current contradiction between supply and demand.

Urea prices are temporarily stable

Entering the end of April, after the mainstream price of domestic urea fell to 1,400 yuan/ton, the suspension of production maintenance caused fluctuating urea prices in Shandong and Henan, but overall, although the urea market in April remained stable, the overall market remained relatively stable.

Yang Tongyu, assistant general manager of Henan Jinkai Group Yanhua Chemical Co., Ltd., believes that the urea market in April was relatively stable relative to the first quarter. The main reason was that after the price fell below the cost line, the industry's operating rate dropped significantly. "Continuous decline in prices made the market pessimistic about the outlook for urea, especially after the price fell to 1,500 yuan/ton. Both small-scale manufacturing companies and large-scale, advanced technology companies with relatively good cost control have lost money. Or do not make money, and the current ex-factory price of 1400 yuan / ton for companies, have to stop production maintenance, reduce the operating rate to a certain extent, eased the continued decline in the price of urea.

The price of urea is low, although there are fluctuations in some areas, market enthusiasm is still not high. Yang Tongyu said that whether large-scale circulation companies or grass-roots distributors, this year's reserves of urea are mostly losses, so the current market confidence is seriously missing.

Suspension overhaul, difficult to solve supply and demand conflicts

All along, the operating rate of the urea industry has become one of the main factors in determining price movements. With the sharp decline in urea prices, the utilization rate of the domestic urea industry declined significantly in the middle or late April. However, the decline in the operating rate has only supported. The price remained stable.

In Yang Tongyu’s view, stopping production maintenance does not mean giving up production. He explained: "At present, the domestic urea market has entered a gap period, after the end of spring fertilizer, the summer market has not yet started, although the price fell below the cost of production, the domestic urea enterprises passively stop maintenance, the industry's operating rate has dropped 70% or less, but this kind of passive shutdown maintenance is only to extend the maintenance period or for safety production considerations, and did not really give up production."

Although the sharp increase in new urea capacity in the past two years has further aggravated the contradiction between supply and demand, it is undeniable that the technology or advantage of new production capacity is very obvious. It is precisely because of this technology or resource advantage that companies are secretly competing. Yang Tongyu believes that, according to the current situation, after a short-term suspension of maintenance, enterprises with resources or technological advantages will surely start work one after another. Therefore, the suspension of maintenance will not ease the current contradiction between supply and demand.

May is the traditional overhaul period of the urea industry. Although urea companies passively stopped production and repairs earlier this year in mid-to-late April, from the survey of reporters, some large companies are indeed considered for safety production. At present, the maintenance of maintenance in May is still the main theme of the market, but it will not ease the current contradiction between supply and demand.

Resolving excess capacity requires a protracted war

The domestic urea price dropped to 1400 yuan/ton, and the demand was dull. The export situation was also not optimistic. Yang Tongyu said that in accordance with the current collection price of 1460-1480 yuan / ton, equivalent to the ex-factory price is only 1350 yuan / ton, so the production enterprises in Henan area will not do the export. "Although this year's export policy has become loose, according to the current situation, even if the zero tariff, manufacturers and distributors will not benefit."

Supply and demand determine prices, and in the final analysis, the downturn in the market and the fall in prices are the source of excess capacity. Resolving excess capacity Although it has already been put on the agenda, there is no reasonable elimination mechanism. When the price rises, as long as there are profits, even if the suspension of production of small businesses will recur, the elimination of excess capacity will require a protracted war.

Yang Tongyu believes that the overcapacity in the urea industry is a long-term surplus, and it will take a long-term process to resolve excess capacity. "The current large-scale enterprises with resources and technological advantages will continue to produce and will not be eliminated. However, the days of companies below 300,000 tons are not so good. After nearly two years of fighting, some companies have lost their competitiveness. After several consecutive years of losses, these small companies have chosen to suspend production or to withdraw from the market for a long time, but this is only the beginning. The road to eliminate backward production capacity is still very long."

Difficulties in the market require confidence and positive energy, but there is indeed a lack of good support from the current urea market. However, the most stringent amendment to the environmental protection law in history has recently been passed. The introduction of the new environmental protection law will accelerate the integration or elimination of the urea industry. After all, the non-capped penalty regulations are shocking for those small urea companies that do not meet environmental standards. They will help reduce the supply of urea and will benefit nitrogen fertilizers in the long term. industry.