Power rationing idles Sichuan fertilizer producers

Fertilizer producers in Sichuan provinces are still seeing output curtailed due to ongoing power rationing.  

The original order for industrial users to ration power was set to expire on August 25th. However, fertilizer producers in the region have said they have not been able to resume production despite being offline for 10 consecutive days.  

Companies are hoping to resume production next week as heat temperatures are expected ease. Urea production in the region is estimated at nearly 20k tons per day. Nationally daily output usually starts its seasonal decline in August with national daily production volumes around 140k tons to 160k tons per day.  

Fertilizer prices and supplies have been volatile over the past year. Futures prices peaked last October at 3,357 yuan/ton ($520 USD/ton) during last Autumn’s power crunch. Logistics and distribution were then impacted during Covid lockdowns in major production areas during the first part of 2022.  

Futures prices have moved higher this week, with the Zhenghzou January contact ending the week at 2,311 yuan/ton ($337 USD/ton). Prices reached a bottom of 2010 yuan/ton in late July as the current heat wave began.  

National average cash prices at the beginning of August were 2,341 yuan/ton according to the latest data from the National Bureau of Statistics. This is down 14% y/y as prices spiked in September and October 2021.