1、 Price trend

According to the Commodity Market Analysis System of Business Society, the price of aniline fell first and then rose this month. At the beginning of the month, aniline showed a downward trend, and the price of aniline began to rise in mid to late October. On July 1st, the market price of aniline was 10225 yuan/ton; On July 31st, the price was at 9880 yuan/ton. The average price of aniline this month decreased by 3.37% compared to the beginning of the month and 10.68% compared to the same period last year.

2、 Analysis and Review

In terms of raw materials, the pure benzene market has seen a significant increase this month, with prices gradually increasing. 1、 Crude oil fell broadly, with a bearish cost side. 2、 The Asian American arbitrage window has closed, and the domestic price of pure benzene in China is high, resulting in a high import volume of pure benzene in July. And the overall supply of pure benzene in the market is sufficient. 3、 The downstream profit level is poor, and the price of styrene has slightly increased, with a 14.18% increase compared to the beginning of the month. At the beginning of the month, the price of pure benzene was 6183 yuan/ton; The price at the end of the month was 7212 yuan/ton, and the price has increased this month, a decrease of 18.89% compared to the same period last year.

Nitric acid: The price of nitric acid has slightly decreased this month. The price of nitric acid in East China was 1950 yuan/ton at the beginning of the month and 1933 yuan/ton at the end of the month, 0.87% lower than the beginning of the month and 29.7% lower than the same period last year.

In July of this year, the price of aniline fluctuated and did not rise until mid to late October. Starting from the beginning of the month, the early maintenance equipment has gradually returned, and the on-site spot supply increment is insufficient; Downstream, due to increased resistance to high priced aniline, the operating rate has decreased and the demand for aniline has increased. Against the backdrop of insufficient supply and increased demand, aniline factories have run out of inventory and prices have fallen significantly. Towards the end of the month, the price of aniline has rebounded.

3、 Future Market Forecast

The demand for pure benzene in the region is strong, and downstream purchases are normal. Traders are just in need of restocking, driving the transaction focus to continue to shift upwards. Crude oil and external markets rose,

Pure benzene still has the possibility of rising in the short term, and there is insufficient cost support for aniline. In July, there were fewer inspections of the aniline plant and there was sufficient supply. Downstream MDI demand is temporarily stable, and the additive industry has entered the off-season, resulting in poor demand performance. In the later stage, we will continue to pay attention to the trend of cost, changes in downstream demand, and changes in the operating rate of aniline plants.

In early July, the metal silicon market showed a broad upward trend, with profits in the southwest region being restored, silicon factories gradually resuming production, and some insulation furnaces in the northwest large factories also resuming production. Manufacturers have made significant price increases. By July 12th, silicon prices had surged due to news of a major factory’s production reduction. Subsequently, it immediately fell back, and the market’s once hyped expectation of high temperature power rationing was falsified. At the same time, the downward revision of Xinjiang’s major manufacturers’ quotations dragged down market sentiment. Southwest manufacturers have a high sentiment of favoring prices, but downstream actual transactions are not good, suppressing the price of metal silicon.

Market analysis

On the supply side

The southwest has entered a flood season, and the electricity prices in Sichuan and Yunnan have decreased by 0.075-0.05 yuan/ton. The electricity prices in Xinjiang have slightly increased. In July, the resumption of production in Yunnan accelerated, and towards the end of the month, due to the impact of the Universiade, partial power restrictions were imposed in Sichuan, but the impact on metal silicon enterprises was limited. Large factories in Xinjiang are purchasing electricity from external networks, and the cost of electricity prices has increased. However, the current situation of large factories in Xinjiang is good, and small and medium-sized factories are gradually resuming production. In August, the precipitation in the southwest increased, and driven by profits in the northwest, it is expected that the metal silicon production in August will slightly increase compared to July.

Inventory aspect

As of July 28th, the total inventory of metal silicon in the three regions was 163000 tons, an increase of 8000 tons compared to the end of last month, or 53.8% year-on-year. In July, metal silicon continued to accumulate inventory. On the one hand, downstream procurement capacity was weak, mainly consuming invisible warehouses; On the other hand, as the delivery date approaches, the number of delivery warehouses continues to increase, and some delivery warehouses in Kunming, Yunnan have reached full capacity within the month.

In terms of demand

In July, the price of polycrystalline silicon slightly rebounded at the end of the month. After the continuous decline of polycrystalline silicon in the early stage, some polycrystalline silicon enterprises ceased production and underwent maintenance at the end of the month. However, the new production capacity continues to be released, and the demand for metallic silicon remains stable.

 
In July, organic silicon DMC showed a weak decline, with many monomer factories increasing their production reduction efforts. However, downstream demand has not boosted significantly, and it is expected that organic silicon will maintain a weak operation in the short term. Aluminum alloy enterprises maintain a rigid demand for metal silicon procurement, but the significant positive impact of policy on the real estate and automotive industries at the end of the month is expected to increase the demand for metal silicon for aluminum alloy in August.

Future Market Forecast

In August, metal silicon may face a situation of double increase in supply and demand. Despite the increase in metal silicon production, it still faces high inventory pressure and insufficient short-term action in silicon prices. However, with the release of new polysilicon production capacity and the improvement of demand margins, there is support for the downward trend. It is expected that metal silicon will maintain a volatile trend in August.

Cobalt prices rose and fell in July

According to data monitoring by Business Society, cobalt prices have risen continuously from 290200 yuan/ton at the beginning of the month to 305600 yuan/ton on July 11th, and have since continued to decline. As of July 31, the cobalt price was 286500 yuan/ton, a decrease of 1.27% compared to the cobalt price of 290200 yuan/ton on July 1; The cobalt price decreased by 6.25% compared to 305600 yuan/ton on July 11th. Downstream demand support is insufficient, and the cobalt market is oversupplied. In July, domestic cobalt prices surged and fell back.

MB cobalt prices fluctuated and fell in July

From the trend chart of MB cobalt price, it can be seen that the MB cobalt price in July did not continue the upward trend of cobalt price in June, and from the middle of the month, the cobalt price slightly decreased. The decline in international cobalt prices is bearish for the domestic cobalt market.

The installed volume of ternary batteries decreased year-on-year

The latest data released by the China Automotive Power Battery Industry Innovation Alliance shows that in June, China’s power battery installation volume was 32.9GWh, a year-on-year increase of 21.8% and a month on month increase of 16.5%. Among them, the installed capacity of ternary batteries is 10.1GWh, accounting for 30.6% of the total installed capacity, a year-on-year decrease of 13%, and a month on month increase of 11.6%. In June, the installed volume of power batteries increased month on month, and the sales of new energy vehicles maintained a significant growth; However, the installation volume of ternary batteries has decreased year-on-year, the proportion of ternary batteries has decreased, the inventory of ternary batteries has accumulated, and the expectation of cobalt market demand growth has decreased, increasing the downward pressure on the cobalt market.

Global mobile phone sales decreased in the second quarter

According to a report released by research firm Counterpoint, in the second quarter of 2023, the global smartphone market sales decreased by 8% year-on-year and 5% month on month, with eight consecutive quarters of year-on-year decline. Mobile phone sales in all regions of the world have contracted, and during the “6.18″ promotion period in China, although the promotion efforts were strong, the response was relatively cold. Counterpoint predicts that the smartphone market will slowly recover in the coming quarters. The sales of mobile phones have decreased and there has been no improvement, leading to an expected decrease in demand in the cobalt market.

Overview and outlook

According to Bai Jiaxin, a data analyst at Business Society, cobalt prices surged in June, but there is insufficient support for future demand growth. Customers are buying up instead of falling, and cobalt prices fell from their high point in July. In June, the installed volume of ternary batteries decreased month on month, global mobile phone sales decreased by 8% in the second quarter, and demand in the cobalt market decreased. Overall, the expected decrease in demand growth and stable supply growth have led to oversupply in the cobalt market, increasing pressure on cobalt prices to decline. It is expected that cobalt prices will fluctuate and decline in the future.

According to the commodity market analysis system of the business community, the Aluminium chlorohydrate market was basically flat in late July: China’s solid (industrial grade, content ≥ 28%) Aluminium chlorohydrate market mainly reported about 1718 yuan/ton. Recently, the production of water treatment enterprises in China’s main production areas has been normal, with sufficient market inventory and average downstream procurement demand, making it difficult to find actual transaction customers; Affected by the falling price of raw hydrochloric acid, the market of Aluminium chlorohydrate did not continue to rise, and the price was temporarily stable this decade.

As shown in the figure, at the beginning of the third quarter of 2023, the domestic market of Aluminium chlorohydrate showed a slight decline in the first ten days of July, the market rose in the middle ten days of July, and the market in the second ten days of July did not support it enough to fall back near the mainstream price at the end of last month.

Raw Material Hydrochloric Acid: According to the Commodity Market Analysis System of Business Society, the domestic hydrochloric acid price dropped from 178 yuan/ton in late July to around 173 yuan/ton. In the middle of the year, the price rise of hydrochloric acid in Henan, the main production area of water treatment in China, led to an increase in the market of Aluminium chlorohydrate. After all, the demand did not follow up significantly. In the later period, the price of hydrochloric acid fell, and the market of Aluminium chlorohydrate fell. The upstream support and downstream procurement willingness for hydrochloric acid are relatively weak, and it is expected that the recent market for hydrochloric acid will experience a slight fluctuation and decline

Liquefied natural gas for production. According to the Commodity Market Analysis System of Business Society, the domestic liquefied natural gas market fell in late July. As of July 28th, the average price of liquefied natural gas in China was 3816 yuan/ton, a decrease of 6.61% from the average price of 4086 yuan/ton on July 21st. Recently, due to market inventory depletion and poor demand during the off-season, there are currently no positive factors supporting liquefied natural gas. It is expected that domestic prices will be weak in the short term, and it is recommended to pay attention to the bidding results of raw gas.

Future market forecast: in the near future, the price of raw materials and fuels has fallen back, and the cost of Aluminium chlorohydrate has weakened; On the supply side, China’s Aluminium chlorohydrate manufacturers are in normal production and have sufficient inventory; On the demand side, there was no significant growth in the latter half of the year,. With regard to the future market, the analysis believes that the market of Aluminium chlorohydrate will continue to be affected by the support of raw materials and downstream demand, and in the short term, it will be mainly stable, supplemented by small shocks.

The supply is high, and the domestic urea market fluctuated and fell in the first half of 2023. In the first quarter, urea prices first rose and then fell, fluctuating around 2770 yuan/ton with an amplitude of 50-70 yuan/ton. Urea prices continued to decline in the second quarter. As of June 30th, the price of urea in the first half of the year decreased by a total of 434.25 yuan/ton, a decrease of 16.10%. The highest point in the first half of the year was 2841.88 yuan/ton in early March, and the lowest point was 2210 yuan/ton in mid June. The maximum decline in the first half of the year was 22.23%.

Overview of the market situation in the first half of the year

First quarter: first up and then down. After New Year’s Day, agriculture began to prepare fertilizers, and downstream warehouses were appropriately replenished. Demand was supported, and the urea market began to warm up. In early February, daily urea production remained at a high level, while coal prices fell, resulting in insufficient cost support. After the holiday, downstream construction started slowly, downstream demand was sluggish, and urea prices fell slightly. In late February, as spring plowing approaches and agricultural demand is strong, urea prices are facing a new round of increase. In mid March, spring plowing and fertilizer supplementation decreased, and the downstream compound fertilizer market was average, leading to a weakening of downstream demand. At the same time, international urea prices continue to hang upside down, and urea prices have begun a downward journey.

Second quarter. Falling and falling endlessly. In April and May, urea entered the off-season of agricultural demand, and the construction of sheet metal factories continued to be sluggish. The combined cost support was insufficient, and urea enterprises accumulated a serious inventory. The market had a strong bearish atmosphere, and urea prices continued to decline. In early June, agricultural demand was concentrated and replenished, coupled with India’s release of a new round of bidding, market sentiment improved, and urea prices surged. However, due to high inventory levels in enterprises, the urea market is gradually cooling down under supply and demand pressure.

Industrial chain

From the price rise and fall chart of the urea industry chain in the first half of the year, it can be seen that both the upstream and downstream markets of urea have experienced significant declines, resulting in multiple negative effects and an overall downward trend in the urea industry chain.

Cost side

In the first half of 2023, the price trend of Anthracite in Yangquan will rise slightly at first and then fall all the way. The price has dropped from 1870 yuan/ton at the beginning of the year to 920 yuan/ton at the end of June, a decrease of 950 yuan/ton, a drop of up to 50.8%. The price of Anthracite has halved, the cost has collapsed, and the support is seriously insufficient. The price of Anthracite has basically dropped to the level in the first half of 21 years.

From the trend chart of liquefied natural gas, it can be seen that natural gas prices have fluctuated and fallen widely. The price has dropped from 6176 yuan/ton to 4296 yuan/ton, a decrease of 30.44%. The highest point of prices in the first half of the year was in mid January, with a price of 6510 yuan/ton. The lowest point was in early June, with a price of 3520 yuan/ton. The maximum decline in the first half of the year was 45.93%, which was basically a half decrease. At the end of June, prices fell by 27.01% year-on-year. The price is basically the same as in 2021.

From the price trend chart of liquid ammonia, it can be seen that the price of liquid ammonia continued to decline in the first half of the year. The price has dropped from 4673 yuan/ton to 2700 yuan/ton, a decrease of about 42%.

In China, the preparation process of urea can be divided into fixed bed process, airflow bed process, and natural gas process. The fixed bed process accounts for about 40%, the airflow bed process accounts for about 35%, and the natural gas process accounts for about 25%. Based on the prices of coal and natural gas at the end of May, the urea cost is fixed bed process>airflow bed process>natural gas process. International urea plants mainly rely on natural gas. However, with the outbreak of the Energy crisis, the cost of urea from gas abroad is higher than that from coal at home.

Demand side

The downstream demand for urea is mainly used for agriculture and industry. Among them, agricultural demand accounts for the main position, accounting for about 70%, and most of it is directly applied as nitrogen fertilizer to crops, grains, fruits, and vegetables. A small portion is synthesized with phosphate and potassium fertilizers to form composite fertilizers and reused in agriculture. The industrial demand is mainly for urea formaldehyde resin, accounting for about 20%. Urea can also be used for melamine and desulfurization and denitrification in power plants.

Agricultural demand is steadily increasing. The country attaches great importance to food security, and the area of grain cultivation is gradually increasing. As of the end of 2022, the total arable land area in China was 1.914 billion acres (127.601 million hectares), a net increase of approximately 1.3 million acres compared to the end of 2021. The increase in arable land has led to an increase in agricultural demand for urea. The seasonal demand for urea in agriculture is relatively strong, and the peak season for agricultural fertilizer use is mostly from March to June.

Industrial demand is sluggish. Urea formaldehyde resin is mainly used in Engineered wood industry. Engineered wood is mainly used in the real estate industry. The real estate industry is currently in a downturn, and the demand for urea in urea formaldehyde resin is currently not favorable. According to the statistics of Guigang Municipal Bureau of Statistics, the plywood production fell 26.7% from January to May this year. It is estimated that the urea demand of Engineered wood will decrease by about 1 million tons in the first half of the year.

In the first half of 2023, the price of melamine significantly decreased, from 8233 yuan/ton to 6575 yuan/ton, a decrease of 20.14%. Producing 1 ton of melamine typically requires 3 tons of urea. According to statistics, the production of melamine in the first half of this year was about 660000 tons, a year-on-year decrease of 128000 tons, equivalent to a decrease of 380000 tons in urea demand.

Production capacity and output

As of the first half of 2023, the urea production capacity was around 75 million tons. The average operating rate of urea enterprises in the first half of the year was around 78%, with a cumulative production of 29.71 million tons, an increase of 800000 tons compared to the same period last year. The cumulative apparent consumption is around 28.8 million tons, an increase of 500000 tons compared to the same period last year. It is understood that the production capacity of newly added and replaced urea plants in 2023 will reach approximately 6.02 million tons (5.22 million tons newly added and replaced with 800000 tons).

Export

From export data, the cumulative export of urea in the first half of 2023 was 1.086 million tons, an increase of 284400 tons compared to the same period in 2022 and a decrease of 1.4155 million tons compared to the same period in 2021. Since the implementation of the urea export inspection policy on October 15, 2021, China’s urea export volume has almost halved. The country with the highest number of urea exports in the first half of the year was South Korea, with a cumulative export volume of 175500 tons, followed by India, with a cumulative export volume of 165700 tons. At present, the FOB price of small particles in China is between 318-320 US dollars/ton (equivalent to RMB 2285-2299 yuan/ton), and the FOB price of large particle ports is between 340-350 US dollars/ton (equivalent to RMB 2443-2515 yuan/ton)

Future prospects

In the second half of 2023, the urea market may experience fluctuations and declines.

Cost side: After a significant decline in the first half of the year, coal prices are expected to stabilize in the second half of the year.

Supply side: There will still be new production capacity in the second half of the year, and daily production may exceed 180000 tons, further increasing supply pressure.

Demand side: There is currently no significant positive support for agricultural demand in the second half of the year. Fertilization in autumn and winter storage at the end of the year should provide some support. Industrial demand is light. The real estate industry is neither warm nor hot, with average construction of sheet metal factories and industrial procurement being the main focus.

Export side: Due to the rise in natural gas prices, international urea prices are currently continuously rising. Under the increasing contradiction between supply and demand, the export side may be a major advantage. But it depends on national policies and the price difference between domestic and foreign markets.