11 January 2012 05:58 [Source: ICIS news]
By Rachel Yang
The actual output of urea is expected to increase by 5m tonnes to 63m tonnes in 2012, but downstream demand is expected to grow by only 1.87m tonnes to 49.87m tonnes this year, according to Chemease, an ICIS service in
The supply glut experienced last year is expected to stretch into 2012 as output may exceed demand by about 13m tonnes, industry sources said.
“As over-supply is expected to continue in 2012, only factories that have the advantage of resources and funding will remain competitive in the market,” a Chemease analyst said.
Urea exports were subject to a 110% tax during the high seasons from January to June, and November to December in 2011, with prices at yuan (CNY) 2,100/tonne ($333/tonne) FOB (free on board), and this policy will continue in 2012, according to the Tariff Commission of the State Council.
Several start-ups this year will possibly worsen the oversupply situation, market sources said.
Xinjiang Yihua Chemical, a subsidiary of Hubei Yihua Group, will bring on stream its 1.4m tonne/year urea plant at Changji in Xinjiang in 2012, a company source said.
China Blue Chemical is to start production at its 1m tonne/year urea plant at
Two other companies, Kaifeng Jinkai Chemical Industry and Inner Mongolia Hulun Buir Jinxin Chemical are planning to bring on stream their 800,000 tonne/year urea plants at
In addition, five companies with a total urea capacity of 2.62m tonnes/year delayed the start-up of their plants from 2011 to 2012, according to Chemease.
Demand from NPK is predicted to rise by 2% to 9.8m in 2012, while melamine demand is predicted to rise by 69% to 2.4m.
The average prices of urea in 2011 was worked out at CNY2,100/tonne EXW (ex-works) and are expected to hit a low of CNY1,900/tonne during the off-peak season in 2012, according to industry sources.
Macroeconomic factors such as an uncertain global economy and domestic inflation are expected to dampen the market further, market players said.
“As inflation and unfavourable economic conditions continue, domestic urea players are now holding a cautious attitude on the urea market,” an industry source said.
Urea is also used in the other industries such as medicine, explosives, leather making and pigments.
Additional reporting by Nicole Zhang
($1 = CNY6.31)
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