2020 urea semi-annual report: the outbreak helps the urea industry briefly spring back supply and demand game price decline is the trend.

Release time:2020-07-06 16:12 Source: Longzhong Information

 

Introduction:In a flash, the unusual 2020 is already halfway through, and the sudden onset of the new crown epidemic at the beginning of the year has had a serious impact on most industries, but for the urea industry, it has played a double-edged sword. Delayed the release of new production capacity, but the supply capacity is still improving, reducing industrial demand, while agricultural demand has increased, although the industry for the late consensus bearish, but the market in the decline in the resistance..., urea industry in the role of many factors, still calculate the perfect through the first half of the year, and the second half of the year will be how to interpret, this article will be from the supply and demand and other aspects of a detailed show.

1. epidemic boosts supply and demand game to continue to decline after a brief spring

2020 is not a good start, and public health events have left China at a standstill or semi-standstill for almost a period of time. From the perspective of the urea industry, raw material shortage, labor shortage, transportation obstruction, etc., in late January to early February, the urea market is in the stage of price without market. However, urea is, after all, the basic necessity of agriculture, and agriculture is the foundation of the country. With the support of various national policies and funds, urea showed an unexpected but unexpected market from mid-February to early March, that is, it saw an increase but the increase exceeded expectations, with small particles increasing by 150-200 yuan/ton and large particles increasing by more than 300 yuan/ton. With the rapid improvement of the industry started, the tight state of supply and demand has also been alleviated, the domestic urea market re-entered the downward channel, until the summer market, superimposed on the decline in demand and industry Nissan, there has been a long and frequent fluctuations in the market.

According to Longzhong data statistics, from January to June 2020, the average market price in Linyi was 1721 yuan/ton, down 12.82 percent from the average price of 1974 yuan/ton in January-June 2019.

2. policy driven, the industry started to improve rapidly

Under the public health incident, in order to stabilize agricultural production and ensure grain production, the state has issued a series of preferential policies for the chemical fertilizer industry. The start-up of the urea industry has increased rapidly since mid-February, reaching a high level one month earlier than the same period last year. However, since May, the enterprise has had more troubleshooting, and the output in the second quarter was slightly lower than that in the same period. On the whole, although the release of new production capacity was delayed, the total output in the first half of the year still increased slightly compared with the same period.

According to Longzhong statistics, domestic urea production was 26.9325 million tons in January-June 2020, up 1.96 percent from 26.414 million tons in January-June 2019.

3. agricultural demand increases, labor demand decreases

Agriculture: In order to reduce the impact of the epidemic and ensure stable and increased domestic grain production, this year the State encourages the restoration of double-cropping rice planting area, the expansion of crop rotation, the reduction of fallow, crop rotation to grow food crops. Taking double cropping rice as an example, it is understood that the main planting areas of Jiangxi and Hunan have increased by nearly 3.8 million tons year on year. According to the calculation of 20kg per mu, the demand for urea is expected to increase by about 80000 tons.

Industry: The decline in demand is mainly manifested in the plate industry. Due to the impact of the epidemic in February-March plate factory is basically at a standstill, since the beginning of late March in April, with the country's gradual liberalization, the plate industry only gradually resumed construction. According to the monthly demand for urea of 80-1 million tons, considering the impact of environmental protection and the Spring Festival last year, the demand for industrial urea is expected to decrease by about 60-800000 tons in the first half of the year.

4. exports were basically flat over the same period.

According to customs data statistics, from January to May 2020, the total export volume of urea will be 1.4978 million tons, plus the estimated data of 200000 tons in June, which will basically be the same as the export volume of 1.7683 million tons in January-June 2019. The export volume can reach the level of the same period, mainly there is still participation in the marking, but also because of the epidemic affecting the market environment at home and abroad, so the total domestic export volume is still relatively limited.

5. futures

In the first half of the urea futures disk early "M" type operation, the middle and late into the downward channel. Before the Spring Festival, the disk as a whole moved upward and fell slightly near the Spring Festival. After the Spring Festival, affected by the new crown epidemic, the disk was oversold and opened. After that, with the superposition of favorable factors such as the "spring ploughing" policy and high-speed free of charge, the disk appeared a wave of upward pressure, rising to a high value in early March for the first half of the year. In March, U.S. stocks melted down four times and international crude oil plummeted, the futures market fell back obviously. At the beginning of April, the main contract 05 was approaching delivery, so it involved the conversion of the main contract. There was a small rise before the conversion of the 05 contract. After April 10, the 09 contract became the main force. As the 09 contract was undervalued and the in stock market fell back, the market continued to fall. The futures market from May to June was relatively flat, with no obvious positive and negative factors. Although there were repeated shocks on the disk, but mostly within a certain range.

6. outlook

For the second half of the year, the biggest negative in the domestic urea market is the release of new capacity, while domestic demand in the second half of the year is not as good as that in the first half of the year. The problem of oversupply can only be alleviated through export volume or policy regulation and control. It is expected that the domestic urea price in the second half of the year may reach a new low level in four years.

1, new production capacity concentrated in the second half of the release.

In 2020, domestic urea will add 8 sets of plants (1 set is the transformation of the old plant), with a total production capacity of 5.32 million tons, of which 6 sets of plants with a production capacity of 4.72 million tons are more likely to be put into operation. Some of the units were originally planned to be put into production in the first half of the year, but they were postponed to the second half of the year due to the outbreak. Judging from the production time known to Longzhong, the installations of Mingshengda and Xinjiang Yihua will be put into trial operation in the third quarter, and the installations of Runyin and Sanning will be put into production after October. The Jiujiang project and Wulan, which are heart-to-heart, may see the progress of the installations by the end of the year. According to this production time estimate, considering the failure accident that will occur when the intermediate equipment is put into production, the output in the second half of the year will be increased by about 500000 tons.

2, policy control, urine enterprises to limit production.

Under the policy guidance, starting from the second half of 2016, urea enterprises in Beijing, Tianjin, Hebei and its surrounding 226 cities, Fenwei Plain and Yangtze River Delta have different degrees of parking and production restriction in autumn and winter. As environmental protection restriction mainly affects fixed bed production enterprises, Jincheng, Shanxi Province is both located in the affected area and basically fixed bed production enterprises, so the acceptance of the restriction is the most obvious. According to last year's impact data, in the fourth quarter, the daily output was about 8000 tons.

At the same time, the state has issued a series of policies to promote coal-to-gas and coal-to-electricity projects, which suddenly caused an extreme shortage of natural gas supply in 2017. Fertilizer, as the off-season stage of demand, has obvious policy impact on production restriction and parking. The daily production of gas head enterprises has also dropped from close to 40000 to less than 10000. However, this production restriction has gradually eased with the increase in natural gas supply in the next two years. Last year, the daily production of gas companies dropped to less than 20,000, and the impact cycle was basically about one month. This year, so far, there has been no news of limited production. Most of the production of gas head enterprises will return to before 2017. Gas head enterprises will produce at the wrong peak in winter, affecting about 10,000 tons of production per day.

Taking into account the company's troubleshooting and other reasons, the daily production level in the fourth quarter will be 1-20000 tons lower than that in the third quarter, which mainly depends on the strength of the policy to limit production.

3. Expected increase in work demand

The downstream demand for urea mainly includes agriculture and industry, compound fertilizer because the terminal is also flowing to the agricultural market, so temporarily considered as agricultural use, the overall agriculture accounted for about 60% of the demand. From the time point of view, the time node of fertilizer use during the year is concentrated before August. Although there is a demand for autumn fertilizer in the crop area of two seasons a year from September to November, it is mainly high phosphate fertilizer, and the demand for urea is relatively small. The support for the market is limited. After November, the winter storage demand of urea, compound fertilizer will also enter the production season of high nitrogen fertilizer, which has a certain supporting effect on the market.

Industrial demand is divided into plate industry, melamine and so on. The impact of the epidemic at the beginning of the year, the plate industry is basically in a stagnant, semi-stagnant state, with the recovery of all walks of life in the second quarter, has now entered the ranks of stable operation. The main uses of plates are construction, furniture, exports, etc. Data analysis shows that the real estate market has intensified in the first half of the year, the new and second-hand markets have basically recovered, and the rental market has been cold in the peak season; it is predicted that the new housing market will gradually stabilize in the second half of the year. There will still be compensatory release of demand in the second-hand market, and improved demand will become a new driving force. In addition, the state to increase infrastructure investment, infrastructure construction will consume a large number of building templates, driving the recovery of plywood demand.

Therefore, from the perspective of the second half of the year, industrial demand is better than that of the first half of the year. However, due to the impact of the first half of the year, the total labor demand for the whole year may be the same as that of the same period last year.

4, exports want to go volume, first price close

Since the domestic urea supply and demand situation is tight, China's dependence on exports has also declined significantly. In 2018, the export volume was 2.4482 million tons, the lowest level in ten years. In 2019, the export volume increased to 4.9448 million tons. According to the state of excess supply and demand this year, the export volume in the first half of the year only reached the level of the same period last year. In order to ease the pressure on domestic supply next spring, the export volume in the second half of the year should increase. Even if it reaches the export level of the same period, the average monthly export volume should be about 500000 tons. If this export volume is reached, the participation of India, the major exporter, must increase. According to the current domestic and international price levels, there is still a certain gap, so the export price in the second half of the year will be a weather vane reference for the domestic market trend, but it is also the driving force of the domestic market decline and the support point of the bottom reference.

5, cost support low price market.

 According to Longzhong data, the full cost level of urea production enterprises in the new coal gasification process in mainstream areas is about 1400 yuan/ton, while the full cost level of fixed bed production enterprises and gas head enterprises is about 1500-1600 yuan/ton (gas head ahead of the implementation of off-season natural gas price preferential policy).According to the current urea price, high-cost production enterprises are close to the cost line, while according to the trend of the market in July, it will basically fall below the full production level of high-cost enterprises.. With the release of new production capacity in the second half of the year and the increase in dependence on exports, domestic prices will open up a new level of space, so this cost level will become one of the factors affecting the change of the supply side, and the continuous loss-making operation for a long time will lead some enterprises to reduce the starting load or even stop, so as to adjust the supply and demand level, buffer and support the falling price market.