Due to economic recession and growing coal stock, coal price slumped in Nov., falling to
RMB800/MT (blind coal) and RMB500/MT (soft coal) at the end of Nov., with the cost of delivery to
fertilizer plants included in the prices.
The coal price slump greatly slashed the cost of urea production. Calculating at blind coal’s price
of RMB800/MT, the cost of urea is RMB1,300/MT. Under the stimulus of winter reserve and
reduction of export tax, coal-based urea producers ran at more than 80% of their capacity in
Shandong, Hebei, Henan and Shanxi in Nov. It is predicted that urea production may grow 4 ~ 5%
in Dec. on the year-on-year basis.
However, the coal price slump intensified traders’ and farmers’ expectation of urea price decline.
Though urea price has tumbled 30% from this year’s peak of RMB2,400 ~ 2,500/MT, buyers still
prefer to wait.
If coal price keeps going south and urea exports remain slim, urea price is predicted to drop below
RMB1,500/MT in early 2009.
