Urea producers are enjoying a recovery of profit, thanks to better raw material supply and upslope
urea price.
As coal price dropped 10 ~ 20% in late Feb. on the year-on-year basis to a level of RMB800 ~
900/MT, urea production cost dropped RMB100 ~ 150/MT in Feb. from the month before to a level
of RMB1,500/MT, allowing a profit margin of more than RMB200/MT. Urea producers with their
own coal resources enjoy a low production cost of RMB1,100 ~ 1,200/MT and a profit of
RMB500/MT. That puts to an end the producers’ struggle around the break-even point since last
Oct.
Due to ineffective implementation of the government’s preferential natural gas price, gas-based
urea producers have to buy natural gas at the market price to meet 40% of their demand. The
current cost of production is RMB1,250 ~ 1,350/MT for urea plants based on natural gas and their
profit margin is about RMB400/MT.
Coal and natural gas price is predicted linger low in the first half of 2009, conducive to the rise of
urea producers’ profit.
