How Long Can Urea Go Up?
June 12, 2024, 9:21 AM
Yan Sensheng, Director of Industrial Research, Feiduoduo
945
How long can urea go up.
With the continuous increase of production costs, the spot price of urea rose rapidly in September, and the quotations in Shandong, Hebei and other places once touched 2,600 yuan / ton. However, the high price in the off-season has restrained the market demand, the downstream mentality is gradually cautious, and the transaction of new orders in the market has slowed down. The company has to issue orders to support, and the production cost is relatively high, and the price attitude is still the same. At present, the price in some areas has begun to loosen slightly. As of September 27, the market price in Linyi, Shandong is 2500~2520 yuan / ton, and the market price in Shangqiu, Henan is 2500~2510 yuan / ton. The futures market responded quickly to the weakening of the market, closing at 2370 yuan/ton at noon yesterday, down 110 yuan/ton from last week's high. The quotation from the Hebei factory is 2520 yuan/ton, and the UR2301 disk is at a discount of 150 yuan/ton.
Costs are rising, and the rise has not stopped
In this round of urea price increase, the strongest driving force for urea comes from cost-side coal. After the beginning of autumn, there is still high temperature and little rain in China, and residents' electricity consumption has increased. In August, the national electricity consumption of the whole society was 852 billion kWh, a year-on-year increase of 10.7%; the electricity consumption of urban and rural residents increased by 33.67% year-on-year, which was higher than the overall growth rate. Hydropower generation fell 11% year-on-year in August after less precipitation. The thermal power output guarantees the supply, making the daily coal consumption of domestic power plants at a high level in the past four years. Yulin and Ordos, the main coal-producing areas, were once affected by the epidemic and precipitation, which caused coal production to decline in stages. By the end of August, the quotation of Q5500 thermal coal reached RMB 1,300/ton, an increase of RMB 150/ton.
In September, the operating rate of chemical and coking terminals increased, and the long-term coal power plant needs to increase the inventory days. The main coal mines actively fulfilled the long-term agreement, and the coal supply in the regional market was tight. Under the support of the active procurement of downstream non-electricity enterprises and traders, the output is in short supply. In addition, the Daqin Line is scheduled to be overhauled for 25 days from September 28 to October 22, which is expected to affect the incoming vehicles of 150,000 to 200,000 tons per day. The overhaul was 10 days earlier than market expectations, and the power plant was forced to increase its acceptance of price increases in order to raise coal inventories to a reasonable level before the Daqin Line overhaul and important meetings.
As of yesterday, the ex-factory price of anthracite from the urea plant exceeded 2,000 yuan/ton, up 400-500 yuan/ton from August. The quotation of Q5500 thermal coal was RMB 1,530/ton, an increase of RMB 300/ton from August. The total cost of Shanxi urea fixed bed enterprises is 2,600 yuan / ton, and the enterprise is currently in a state of loss. The increase in coal prices will drive the cost of fixed-bed enterprises by 300-350 yuan/ton. Probably during the National Day, the anthracite lump coal will still be raised by about 100 yuan / ton, and the loss of enterprises may further increase.
The coal inventory of urea factories is at a safe level. Mysteel survey data shows that the average available days of coal storage in urea factories is 9.9 days, an increase of 0.1 days from the previous week, and a difference of 5.1 days from the target inventory. Urea enterprises believe that coal prices are at a high level and their willingness to purchase is not strong, so they maintain existing inventories.
Supply growth, high expectations
In terms of supply, the urea plant underwent both routine maintenance and temporary maintenance last week, and the output dropped significantly, with the weekly average daily output dropping to around 151,000 tons. This week, Xinjiang Zhongneng, Shanxi Orchid, Jinfeng and other manufacturers still have maintenance plans, and the daily output of urea will probably be 152,000 to 158,000 tons. September is coming to an end, and the domestic monthly output of urea is about 4.6708 million tons, an increase of 453,200 tons over the same period last year. Taking into account the factors of power curtailment caused by Shanxi's loss of production and dual control of energy consumption in September 2021, a year-on-year increase of 450,000 tons in September can be considered slightly higher than expected.
From the perspective of inventory, the market demand was stable in September, and after the daily output rebounded, the factory inventory increased to 681,900 tons. The port inventory was affected by the Indian tender, and the inventory increased slightly by 19,000 tons to 205,000 tons. Against the backdrop of increased supply and restricted exports, corporate inventories and port inventories totaled 886,900 tons, a year-on-year increase of 52,100 tons on September 1, 2021.
Recently, the air pollution prevention and control measures in Jincheng in autumn and winter have been issued. Some urea plants in Jincheng, Shanxi have started production reduction and production restrictions since October. Superimposed on the convening of an important meeting in October, this year, Jincheng enterprises will stop production and limit production from late October in previous years to mid-to-early October this year. Jinneng Holdings, Orchid Science and Technology, and Tianze Group adopted an internal overall planning approach, limiting production to 25% for companies with a performance rating of B, and 35% for companies with a performance rating of C. According to Longzhong Information, the output in October is about 4.9 million tons.
Affected by the adjustment of export policy, domestic urea export dropped sharply this year. From January to August, the cumulative export was 1.22 million tons, a year-on-year decrease of 1.7 million tons. Exports in September were about 350,000 to 400,000 tons, a year-on-year decrease of 690,000 tons. The second half of a normal year is the peak export period, and the export volume must have increased compared with the first half of the year, which also means that the pressure brought by the decrease in exports in the fourth quarter is greater than that in the first half of the year. According to the forecast of 200,000 to 400,000 tons per month, it is predicted that exports in the fourth quarter will decrease by 470,000 tons year-on-year.
On the basis of the existing factory inventory of 681,900 tons, the output in October is estimated to increase by 470,000 tons year-on-year, and the month’s exports are estimated to decrease by 380,000 tons year-on-year. The supply pressure in October is still relatively large. Although the urea cost support is strong, the high price inhibits the release of demand, the market is more difficult to undertake, and the pressure for callback increases.
The market is near strong and far weak
At this stage, the supply and demand of urea itself is balanced, the cost support is strong, and there is not much room for correction below. The pressure on factory inventory is increasing, and there is a high probability that there will be accumulation of inventory in October. Supply expectations are high, and a callback is inevitable. Once coal prices stop rising or fall, the decline in urea will accelerate. In mid-to-late October, we need to pay attention to the poor supply expectations and the cost side. If fixed-bed companies delay the resumption of production due to profit reasons, the market will stabilize after the supply is reduced and the State Reserve enters the market. In winter, the contribution of hydropower will decline, and thermal power will continue to have a high demand for thermal coal. The tight coal supply situation will not change much.
Costs are rising, and the rise has not stopped
In this round of urea price increase, the strongest driving force for urea comes from cost-side coal. After the beginning of autumn, there is still high temperature and little rain in China, and residents' electricity consumption has increased. In August, the national electricity consumption of the whole society was 852 billion kWh, a year-on-year increase of 10.7%; the electricity consumption of urban and rural residents increased by 33.67% year-on-year, which was higher than the overall growth rate. Hydropower generation fell 11% year-on-year in August after less precipitation. The thermal power output guarantees the supply, making the daily coal consumption of domestic power plants at a high level in the past four years. Yulin and Ordos, the main coal-producing areas, were once affected by the epidemic and precipitation, which caused coal production to decline in stages. By the end of August, the quotation of Q5500 thermal coal reached RMB 1,300/ton, an increase of RMB 150/ton.
In September, the operating rate of chemical and coking terminals increased, and the long-term coal power plant needs to increase the inventory days. The main coal mines actively fulfilled the long-term agreement, and the coal supply in the regional market was tight. Under the support of the active procurement of downstream non-electricity enterprises and traders, the output is in short supply. In addition, the Daqin Line is scheduled to be overhauled for 25 days from September 28 to October 22, which is expected to affect the incoming vehicles of 150,000 to 200,000 tons per day. The overhaul was 10 days earlier than market expectations, and the power plant was forced to increase its acceptance of price increases in order to raise coal inventories to a reasonable level before the Daqin Line overhaul and important meetings.
As of yesterday, the ex-factory price of anthracite from the urea plant exceeded 2,000 yuan/ton, up 400-500 yuan/ton from August. The quotation of Q5500 thermal coal was RMB 1,530/ton, an increase of RMB 300/ton from August. The total cost of Shanxi urea fixed bed enterprises is 2,600 yuan / ton, and the enterprise is currently in a state of loss. The increase in coal prices will drive the cost of fixed-bed enterprises by 300-350 yuan/ton. Probably during the National Day, the anthracite lump coal will still be raised by about 100 yuan / ton, and the loss of enterprises may further increase.
The coal inventory of urea factories is at a safe level. Mysteel survey data shows that the average available days of coal storage in urea factories is 9.9 days, an increase of 0.1 days from the previous week, and a difference of 5.1 days from the target inventory. Urea enterprises believe that coal prices are at a high level and their willingness to purchase is not strong, so they maintain existing inventories.
Supply growth, high expectations
In terms of supply, the urea plant underwent both routine maintenance and temporary maintenance last week, and the output dropped significantly, with the weekly average daily output dropping to around 151,000 tons. This week, Xinjiang Zhongneng, Shanxi Orchid, Jinfeng and other manufacturers still have maintenance plans, and the daily output of urea will probably be 152,000 to 158,000 tons. September is coming to an end, and the domestic monthly output of urea is about 4.6708 million tons, an increase of 453,200 tons over the same period last year. Taking into account the factors of power curtailment caused by Shanxi's loss of production and dual control of energy consumption in September 2021, a year-on-year increase of 450,000 tons in September can be considered slightly higher than expected.
From the perspective of inventory, the market demand was stable in September, and after the daily output rebounded, the factory inventory increased to 681,900 tons. The port inventory was affected by the Indian tender, and the inventory increased slightly by 19,000 tons to 205,000 tons. Against the backdrop of increased supply and restricted exports, corporate inventories and port inventories totaled 886,900 tons, a year-on-year increase of 52,100 tons on September 1, 2021.
Recently, the air pollution prevention and control measures in Jincheng in autumn and winter have been issued. Some urea plants in Jincheng, Shanxi have started production reduction and production restrictions since October. Superimposed on the convening of an important meeting in October, this year, Jincheng enterprises will stop production and limit production from late October in previous years to mid-to-early October this year. Jinneng Holdings, Orchid Science and Technology, and Tianze Group adopted an internal overall planning approach, limiting production to 25% for companies with a performance rating of B, and 35% for companies with a performance rating of C. According to Longzhong Information, the output in October is about 4.9 million tons.
Affected by the adjustment of export policy, domestic urea export dropped sharply this year. From January to August, the cumulative export was 1.22 million tons, a year-on-year decrease of 1.7 million tons. Exports in September were about 350,000 to 400,000 tons, a year-on-year decrease of 690,000 tons. The second half of a normal year is the peak export period, and the export volume must have increased compared with the first half of the year, which also means that the pressure brought by the decrease in exports in the fourth quarter is greater than that in the first half of the year. According to the forecast of 200,000 to 400,000 tons per month, it is predicted that exports in the fourth quarter will decrease by 470,000 tons year-on-year.
On the basis of the existing factory inventory of 681,900 tons, the output in October is estimated to increase by 470,000 tons year-on-year, and the month’s exports are estimated to decrease by 380,000 tons year-on-year. The supply pressure in October is still relatively large. Although the urea cost support is strong, the high price inhibits the release of demand, the market is more difficult to undertake, and the pressure for callback increases.
The market is near strong and far weak
At this stage, the supply and demand of urea itself is balanced, the cost support is strong, and there is not much room for correction below. The pressure on factory inventory is increasing, and there is a high probability that there will be accumulation of inventory in October. Supply expectations are high, and a callback is inevitable. Once coal prices stop rising or fall, the decline in urea will accelerate. In mid-to-late October, we need to pay attention to the poor supply expectations and the cost side. If fixed-bed companies delay the resumption of production due to profit reasons, the market will stabilize after the supply is reduced and the State Reserve enters the market. In winter, the contribution of hydropower will decline, and thermal power will continue to have a high demand for thermal coal. The tight coal supply situation will not change much.
June 12, 2024, 9:21 AM
June 12, 2024, 9:21 AM
June 12, 2024, 9:21 AM
June 12, 2024, 9:21 AM
June 12, 2024, 9:21 AM