Urea falling prices coal urea companies make big profits

According to relevant data, although urea prices have been declining since the third quarter of 2012, it is understood that the profitability of urea companies has not been greatly reduced. For coal urea production enterprises, which account for 70% of the industry's share, because coal raw material prices also have a sharp correction, these companies have continued to maintain stable profits since the first quarter.

According to data from Baichuan Information, during the third quarter, the price of urea in East China was retraced from RMB 2,400/tonne to RMB 2,000/tonne. However, the profits of urea producers are generally not affected by the sharp price correction. For example, the three quarterly reports of the above-mentioned municipal companies included net profits of Hualu Hengsheng, Lanzhou Kechuang, Sichuan Meifeng, and Haotianhua both increased year-on-year. In particular, Huadu Hengsheng, a coal urea leading company, experienced a net profit increase of more than 500% year-on-year in the third quarter.

It is understood that the reason why the price of urea fell back to last year's level in November, the profits of coal head enterprises also rose sharply, because compared to the same period last year, coal raw material prices are at an absolute low level.

Zhang Ming, a senior analyst at Business Club, made a calculation for the reporter. In late October last year, the average price of anthracite in Shandong and Henan was around 1,735 yuan/ton. By October this year, the average price of anthracite coal fell to 1230. RMB/ton, calculated from the current domestic urea production technology level, the production of one ton of urea coal consumption is 1.5 tons, so the raw material cost of one ton of urea can be reduced by 29%~30%, while the urea price drop in the same time period Only 5% to 6%, so compared with the same period last year, urea companies have greatly increased their profit margins.

Based on the above costs, even in the second quarter when urea prices were high, the profits of coal companies in the third quarter were relatively stable. According to Zhang Xiang, a research fellow at Changjiang Securities, in the first half of the year, the purchase price of raw material Anthracite from Hualu Hengsheng was 800 yuan/ton at the peak. With the decline in coal prices, the price fell to 600 yuan/ton in the third quarter, and the cost reduction was 150 yuan. 200 yuan / ton, during which the price of urea per ton dropped by nearly 300 yuan, and the decline in earnings was lower than market expectations.

In fact, from the first quarter of this year, urea has become a profit support for production companies. In general, urea companies will produce DMF, trimethylamine and other by-products or involved in the production of fertilizer and other fertilizer varieties. The semi-annual report shows that nearly all companies' urea gross margins have increased significantly year-on-year, with gross margins ranging from 9% to 28%. At the same time, the performance of derivatives such as melamine and DMF that had been highly hoped for has caused eyebrows to drop. . Take Hualu Hengsheng, with better cost control capability, as an example, the gross profit rate of the company's acetic acid products dropped by 26.78% year-on-year in the first half of the year, and trimethylamine and DMF also declined by 5% to 7% year-on-year.

Looking into the next two months, the industry generally believes that although the urea export is nearing completion, the domestic market will not be too quiet because of the start of light storage. In addition, the reporter learned from distributors in East China and North China that dealers’ inventory is generally below 40%, and the purchasing space is relatively large.

However, it is worth mentioning that the contradiction between oversupply and demand in the urea industry has been outstanding. This year, new production capacity of nearly 5 million tons in Inner Mongolia and Henan will create a drag on the market to a certain extent.