India Sweeps Up Over 80% of China's September Export Volume Amid Coal Price Anomalies
China Secures Highest Urea Stock in 5 Years for November... Export Restrictions Likely to Be Lifted
[Asia Economy Beijing=Special Correspondent Jo Young-shin] It is estimated that South Korea experienced a urea solution shortage due to India sweeping up Chinese-made urea in September.
However, with China's coal prices plummeting since October 20 and China's urea stock estimated to exceed 830,000 tons as of the 4th of this month, it is expected that Chinese authorities will ease restrictions on urea exports.
According to reports from China's Pangzheng Futures on the 10th, India imported over 820,000 tons of urea from China in September. China's urea export volume in September was 1.09 million tons. With India importing urea on a large scale, China's September export volume surged by a whopping 317.8% compared to the previous month.
Some in Beijing estimate that China's urea export volume for October, though not officially tallied, will be around 800,000 tons, with most of it presumed to have been imported by India.
India imported about 600,000 tons of Chinese-made urea in September last year and about 200,000 tons in 2019. India typically imports Chinese-made urea from September to December but suddenly increased its import volume significantly this September.
As international raw material prices such as coal and natural gas showed abnormal signs, it is believed that the Indian government quickly imported Chinese-made urea. This contrasts with the South Korean government, which was slower to respond, including emergency imports of urea from Australia and Vietnam, efforts to diversify import sources, and discussions on dispatching special envoys.
China also suffered indirect damage due to India's surge in urea imports. Rising international raw material prices like coal increased urea production costs. Additionally, urea production decreased due to coal shortages, causing urea prices within China to soar and creating confusion among farmers.
According to data released by China's Ministry of Commerce, as of the 22nd of last month, domestic urea prices in China rose to 2,809 yuan per ton. From 2018 to 2020, urea prices in China traded between 1,800 and 2,100 yuan per ton. After surpassing 2,100 yuan per ton in March, Chinese urea prices rose gradually before skyrocketing in September.
In particular, urea futures prices in China in October surged to 3,357 yuan per ton. Afterwards, prices fell again to 2,468 yuan per ton, resulting in a rollercoaster ride for urea prices.
Fortunately, the price of coal for power generation in Qinhuangdao, China, dropped to 1,100 yuan per ton as of the 2nd. On the 20th of last month, Chinese coal prices had risen to 2,570 yuan per ton. In just two weeks, Chinese coal prices plunged by 57%. Qinhuangdao is China's largest coal port, and Qinhuangdao coal prices are considered the standard price in China.
Pangzheng Futures predicted that as China's coal production increases and coal prices plummet, the cost burden on Chinese urea producers is easing, and urea prices will continue to decline until the end of this year.
There is also analysis that China's urea stock has normalized again. Pangzheng Futures estimated that since the Chinese government changed its export quarantine management method for chemical fertilizer items on the 15th of last month, exports have been restricted, and China's urea stock reached 833,000 tons (as of November 4). Pangzheng Futures added that this is the highest level in the past five years.
In September, China's National Development and Reform Commission issued numerous policies hinting at export restrictions, including ▲providing railway freight discounts for water-soluble fertilizers ▲ensuring stable production of chemical fertilizer manufacturers in the metropolitan area during the autumn and winter air pollution control period ▲maintaining stability of agricultural electricity rates ▲measures to stabilize supply volume and prices of chemical fertilizers.
Meanwhile, some in Beijing expect that since China has stockpiled urea, it will soon approve exports. South Korea's demand for urea solution for diesel vehicles is estimated to be around 20,000 tons per month.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
