Autumn Fertilization Progresses, Domestic Compound Fertilizer Market Experiences Upward Trend

As the autumn season advances, the domestic compound fertilizer market continues to exhibit an upward trend, with limited possibilities for price reductions. Examining the price trends of compound fertilizers from the beginning of 2023, a pattern of initial stability followed by subsequent declines becomes evident. Statistical analysis reveals that the average annual price of domestic 45% sulfur-based compound fertilizer (15-15-15) in 2023 stands at 2975 CNY/ton. This price is 332 CNY higher than the yearly high point (at the beginning of the year) and 430 CNY higher than the yearly low point (in the first week of July).

During the second quarter's declining market phase, the willingness of market participants to sell was strong, resulting in gradual depletion of social inventory. Low inventory levels caused compound fertilizer to experience a hard landing as the prices of key raw materials such as nitrogen, phosphorus, and potassium continued to rise. Presently, reference prices for compound fertilizers are as follows: 45% sulfur-based compound fertilizer (14-16-15/15-15-15) is priced at 2680-2850 CNY, and 45% chlorine-based compound fertilizer (15-15-15) is priced at 2350-2600 CNY. Some 45% wheat fertilizers are sold at factory prices ranging from 2650 to 2850 CNY.

Since July 2023, a combination of geopolitical conflicts, extreme weather in certain regions, and the termination of the Black Sea agreement has led to varied degrees of price increases in the international fertilizer market. For instance, the offshore average price of Baltic granular urea stands at 356 USD, marking an increase of 131 USD from its low point. The onshore price of Baltic ammonia phosphate is 495.02 USD, with a rise of 95 USD from the yearly low. These increases in raw material prices directly affect compound fertilizer prices, with the current offshore price for 45% (15-15-15) compound fertilizer from the Baltic reaching 358 USD, indicating a rise of 27.5 USD. With increased trade activity, these prices are expected to continue rising.

During this peak season of international demand, products like urea, ammonium phosphate, and diammonium phosphate that partially export are leading to temporary supply shortages, subsequently influencing domestic price trends.

Data from the United Nations' Food and Agriculture Organization reveals a 2.8% monthly increase in the global rice price index in July, reaching its highest level in nearly 12 years. In early August, Asian rice prices even reached a point not seen in nearly 15 years. While domestic rice prices are relatively unaffected due to ample supply, other grains like corn are experiencing high volatility, and the wheat market continues a minor upward trend due to limited grain circulation. Considering international market feedback from both upstream and downstream, the compound fertilizer market could potentially receive positive news.

The pessimistic sentiment prevailing in the compound fertilizer market during the first half of the year has extended into autumn, causing some companies to make incorrect judgments and wait for better opportunities. As autumn sets in, some small-scale compound fertilizer companies have yet to receive payments for their supplies, making it difficult for them to enter the market later. Currently, orders are limited. While larger compound fertilizer companies have received the first round of pre-payments, they have done so at lower prices. Presently, downstream customers are enthusiastic about picking up orders, leading to shipment constraints.

Considering that the peak time for seasonal fertilizer use typically falls before mid-October, the supply chain must be established within 50 days. However, a balance or even a shortage of raw materials could impact the situation. The compound fertilizer production process also requires time. Despite the current increase in production loads to a relatively high 49.72%, finished goods inventory remains low, and some products with specific ratios are still in short supply. To avoid supply shortages and price instability, compound fertilizer companies are forced to accept limited orders. This situation is expected to continue until mid-September.

Based on these factors, autumn compound fertilizer is currently not poised for price reductions, and the market is likely to experience gradual upward movement.