High-temperature savior in the fertilizer market

The increase in temperature has led to an increase in the operating rate of the power plant and a significant increase in the demand for coal, thus changing the situation in which coal prices have continued to fall and fall over the previous period. The main raw material for urea is coal, so the increase in temperature is beneficial to urea manufacturers.

In the high-temperature environment, the historical record of electricity consumption has been continuously refreshed throughout the country, power shortages have begun to appear, and power cuts have also affected the urea companies. Some urea companies received notices of power cuts and the average production load was reduced by about 20%. The short-term power cuts caused by high temperatures have reduced the supply of urea in the short term, which has eased the current contradiction of serious oversupply of urea. However, according to the current limited power, it is impossible to reverse the situation in which urea supply exceeds demand.

High temperatures and droughts will also lead to a reduction in demand for fertilizers in the current period, but high temperatures and droughts occur in late July and are the country’s off-season fertilizer season. Therefore, the demand for fertilizers in the current period will not have much impact. For the later period, high temperatures and droughts will reduce the production of crops. The reduction of crop production will inevitably lead to the increase of agricultural product prices. The increase in the price of agricultural products will lead to the increase of farmers' enthusiasm for planting land, resulting in an increase in the demand for fertilizers in the later period. Considering the current status of agricultural use in China, the increase in demand for fertilizers in the later period will be extremely limited.

High-temperature weather also has an impact on the production of compound fertilizers, because compound fertilizers are labor-intensive industries. High-temperature weather limits the increase in production of compound fertilizers and postpones the release of urea from compound fertilizers. With the end of high temperatures, the demand for raw materials for urea production will be significantly increased.

High temperature weather not only supports the cost of urea, but also helps to improve the supply and demand relationship of urea in the future. Therefore, high temperature weather brings certain favorable factors to the current weak urea market. However, we must clearly understand that high-temperature weather is a periodic phenomenon, and therefore it is only a phase of favorable factors. With the passage of time into the late August, this favorable factor will disappear, and therefore it cannot form a long-term support for the price of urea: once the high-temperature weather ends, the coal price may continue to decline, and the urea companies' power cuts will no longer occur. Appeared, urea will return to the track of serious oversupply, prices will continue to decline.