The chemical industry to promote production losses policy pattern is expected to reconstruct

urea prices rebounded strongly, the market continued to be expected. Domestic urea prices began to fall into the channel since the second half of 2012, in August this year, urea prices fell below 1200 yuan / ton.

After the raw materials in the upstream coal prices rose rapidly under the impetus of urea prices rose to 1500 yuan / ton. The recent industry continued to affect the low operating rate and low stock market, when coal prices stabilize, urea prices from the previous cost push up demand led to rising prices for switching. As of December 27th, the price of urea market in most areas of Shandong, Jiangsu, Hunan, Hubei, Sichuan and Guangdong has risen to 1700 yuan / ton.

Long term, industry losses policy to promote the capacity to continue to deepen, the production pattern is expected to reconstruct. Due to the rising price of coal, gas and other preferential policies for cancellation of fertilizer production of electricity, and the production cost of urea significantly improved, the current price is only a small profit enterprises, small and medium capacity large area closed exit. At the same time, the supply side policy reform deepening, Chinese nitrogen fertilizer industry association to develop “13th Five-Year” during the return of 13 million tons of urea production target. In the industry losses, the promotion of policies and environmental pressure, to capacity is expected to accelerate the industry supply and demand will be greatly improved. Coal water slurry technology also has the technology and cost advantage is expected to become the future mainstream production technology.

The short term, the industry is expected to maintain a low operating rate, with the spring peak demand season, the supply gap, will probably push up the price of the birth rate of urea, structural market. This year the cost of urea long-term price and the market upside down to continue to reduce operating rate. The second half of the environmental protection policy has started to accelerate the decline rate of hypertension. At present, the industry operating rate of less than 50%, the monthly output of less than 4 million tons. At the same time starts to show the structural differentiation, the advantages of enterprises to maintain high operating rates, and backward production capacity limit production shutdown. We believe that the trade deficit and environmental pressures continue under the low operating rate is expected to remain. According to estimates of the spring season (2-5 months) monthly demand of about 5 million 800 thousand tons, there is a big gap in supply, will probably push up the price of urea rate. The fixed bed head and process cost judgment, we expect the price of urea will be at least up to 1800 yuan / ton, optimism is expected to 2000 yuan / ton. In addition, with the cancellation of export tariffs of urea, the export market is expected to pick up next year.