2026 China Urea Market Mid-Year Report

01 China Urea Market Review in H1 2026

1.1 China Urea Market Overview

In the first half of 2026, China’s domestic urea market followed a pattern of “strong external market, stable domestic market, rising first and then falling.” The international market fluctuated sharply under the influence of geopolitical conflicts, tighter energy supply and disruptions to shipping routes. By contrast, China’s domestic market moved relatively independently, supported by effective insulation from export control policies.

At the beginning of the year, seasonal demand was released ahead of schedule, while earlier reserve fertilizer demand also entered the market. At the same time, overseas geopolitical conflicts disrupted global nitrogen fertilizer supply, pushing international prices higher. Wider export profit margins drove sentiment in the domestic market, and concentrated restocking by compound fertilizer producers improved trading activity, leading prices to rise steadily.

During the spring farming season, nationwide agricultural fertilizer demand was released in a concentrated manner. Spot prices continued to rise on peak-season support, while favorable overseas import tender news further boosted sentiment, pushing the market to its highest level in the first half.

After spring fertilizer demand ended, agricultural rigid demand quickly declined, and market support weakened significantly. In addition, concentrated maintenance restarts were completed, new capacity continued to come online, industry operating rates and daily output rose simultaneously, supply continued to increase, factory inventories entered an accumulation phase, and the price center gradually moved lower.

In early June, adjustments to export-related control policies briefly boosted market sentiment, and spot prices saw a phased rebound. However, the fundamentals of weak domestic off-season demand and sufficient supply did not fundamentally change. The rebound lacked sustainability, and by the end of the month, the market returned to a weak and volatile pattern.

According to FDD data, as of June 30, 2026, the lowest domestic small granular urea price index in the first half occurred in early January at 1,749.32, while the highest level occurred in late April at 1,927.27.

In the first quarter, China’s domestic urea market saw intensified supply-demand competition and a moderate upward price trend. After New Year’s Day, affected by India’s tender and multiple news-driven factors, rising urea futures prices improved spot market trading activity, and ex-factory quotations in major production and consumption regions successfully moved above key price levels.

In February, the market continued to rise before and after the Spring Festival. Before the holiday, producers received orders smoothly. After the holiday, spring farming fertilizer demand started, while geopolitical factors pushed international prices higher and widened domestic-foreign price spreads, further lifting prices.

In March, spring farming demand entered full swing. In early March, both agricultural and industrial sectors restocked intensively, while international prices and futures rose simultaneously, supporting firm spot prices. In mid-to-late March, end-user restocking returned to a more rational pace, off-season reserve cargoes were gradually released, and the market gradually stabilized with narrower fluctuations.

Although industry daily output remained high, concentrated demand release created short-term supply-demand mismatches. In mainstream regions, supply even became tight, which became the main driver for producers to hold prices firm. However, constrained by industry guidance prices, upward momentum was limited, and quotations at most producers stayed largely aligned with prescribed price limits.

In the second quarter, the domestic urea market’s operating logic revolved around dynamic adjustments to export policy. April remained within the spring farming peak season. The market operated steadily at the beginning of the month, while transactions improved in mid-April driven by India tender news and futures support. In late April, export-related news pushed prices to the highest level of the first half.

After entering May, spring farming demand gradually ended, agricultural demand entered a phased gap period, and industrial demand such as compound fertilizer also weakened as operating rates declined. Meanwhile, supply remained high, and the contradiction of oversupply began to emerge, leading the market to weaken noticeably.

In late May, the formal launch of export quotas, with a considerable total volume, briefly boosted market sentiment and helped prices stop falling and rebound. However, entering June, export guidance prices were relatively high, actual order follow-up was slow, and the positive impact fell short of expectations. At the same time, compound fertilizer operating rates dropped to the lowest level of the first half, while drought in parts of southern China further dragged on agricultural demand.

Under the fundamental pattern of strong supply and weak demand, market sentiment became cautious, and prices continued to decline. Overall, the urea market in the second quarter rose first and then fell, with the pace of export policy adjustment becoming the key variable driving market fluctuations.

02 China Urea Output, Operating Rates and Import-Export Analysis

2.1 China Urea Output in H1 2026

According to FDD statistics, China’s cumulative urea output in the first half of 2026 reached 38.5842 million tonnes, up 3.2453 million tonnes from the same period last year, representing a year-on-year increase of 9.18%.

In the first half of 2026, domestic urea output continued the high-supply pattern seen in recent years, with total output recording clear year-on-year growth. The industry as a whole remained in the release phase of the capacity expansion cycle. The successive commissioning of new capacity provided the main incremental contribution to output growth, while existing units generally maintained strong operating willingness.

Among production processes, coal-based urea maintained high-load operations due to relatively controllable raw material costs. By contrast, gas-based urea in Southwest China and other regions remained constrained by high natural gas prices and cost inversion, keeping operating rates at relatively low levels and creating clear divergence by process route.

In the first half, industry operating rates as a whole remained at relatively high levels compared with historical periods, and daily output stayed in a high range. Ample supply remained the dominant feature throughout the period and continuously capped the upside for urea prices. Overall, urea output in the first half was characterized by high total growth, stronger coal-based production, weaker gas-based production and elevated operating rates.

2.2 China Urea Industry Operating Rate Analysis

In the first half of 2026, the urea market maintained high operating rates overall, with limited fluctuation. According to FDD statistics, China’s average urea operating rate in the first half of 2026 was 88.87%, up 2.91 percentage points from the same period last year.

Among them, the average operating rate of natural-gas-based urea producers was 70.48%, while the average operating rate of coal-based urea producers was 94.84%. The average operating rate of large granular units was 85.81%, while that of small and medium granular units was 90.55%.

In January, some units underwent concentrated maintenance, causing the operating rate to decline. Thereafter, as spring farming fertilizer preparation and peak-season fertilizer demand started, industry production loads gradually increased and remained high. From May to June, although the overall industry operating rate remained high, some unit loads were adjusted as demand entered a gap period and compound fertilizer operating rates declined.

2.3 China Urea Export Volume in 2026

2.3.1 China Urea Export Volume in 2026

According to customs data, from January to May 2026, China’s cumulative urea export volume reached 496,500 tonnes, up 485,400 tonnes from the same period last year, representing a year-on-year increase of 4,395.08%.

Overall, exports showed a high-to-low pattern and were subject to phased restrictions. The policy orientation of ensuring domestic spring farming supply and strictly controlling outflows ran through the period. Export scale was constrained by quota controls, seasonal regulation and international price fluctuations, and the overall diversion of domestic supply remained limited.

2.3.2 China Urea Export Destinations in 2026

From January to May 2026, the top ten export destinations were Sri Lanka, Brazil, Malaysia, Chile, Nepal, Bangladesh, South Korea, Hong Kong, China, Vietnam and the Philippines.

Their export shares were 25%, 15%, 12%, 10%, 6%, 5%, 5%, 3%, 3% and 3%, respectively.

03 China Urea Apparent Consumption Analysis

According to FDD data, from January to May 2026, China’s cumulative apparent urea consumption was 31.6462 million tonnes, up 2.2225 million tonnes from the same period last year, representing a year-on-year increase of 7.55%.

04 China Urea Inventory Analysis

4.1 Large Granular Urea Port Inventory Trend

In the first half of 2026, large granular urea port inventories remained generally low and stable. Since the beginning of the year, there has been no obvious concentrated inventory buildup or large-scale port collection increase.

According to FDD statistics, as of June 30, 2026, China’s large granular urea port inventory stood at 103,900 tonnes, down 181,100 tonnes from the same period last year.

4.2 Small Granular Urea Port Inventory Trend

In the first half of 2026, small granular urea port inventories were also mainly low and stable under policy influence.

According to FDD statistics, as of June 30, 2026, China’s small granular urea port inventory stood at 49,000 tonnes, down 40,700 tonnes from the same period last year.

4.3 Urea Producer Inventory Trend

In the first half of 2026, urea producer inventories followed a “V-shaped” reversal. After falling to the year’s low in late April, inventories rebounded quickly and had accumulated to a mid-to-high level for the year by the end of June.

According to FDD statistics, as of June 30, 2026, average domestic urea producer inventory stood at 836,200 tonnes, down 259,700 tonnes from the same period last year, representing a year-on-year decline of 23.70%.

05 China Urea Market Outlook for H2 2026

Supply: Based on the current urea industry situation, new capacity will continue to be released in the second half of the year. The urea supply side may show a pattern of increasing output, rising inventories and a gradually lower profit center amid fluctuations.In H2 2026, urea capacity utilization is expected to remain high. Against a high operating-rate backdrop, coal-based urea producers are expected to maintain stable production enthusiasm because costs are relatively controllable and producers still retain some profit margins. Unexpected maintenance is expected to be limited. Gas-based urea, however, will continue to face pressure from high natural gas costs, and operating rates may remain relatively low. Cost divergence is expected to continue.Overall, industry operating rates are expected to remain high in the second half, and daily output may rise further. The ample supply pattern is unlikely to reverse in the short term and will continue to pressure prices.

Demand: In the second half, domestic demand is expected to show a seasonal pattern of weakness first and then strength. In July, rice topdressing demand in southern China may still provide phased support. However, after August, agricultural demand will gradually enter the traditional off-season. Industrial demand from compound fertilizer, melamine and other sectors is expected to provide limited support. Demand from the panel and adhesive industries is likely to remain weak due to continued pressure in the real estate market.Entering the fourth quarter, domestic demand is expected to gradually recover as autumn wheat base fertilizer demand starts and off-season commercial reserves enter the market, providing phased support to the market.Exports will remain the most important marginal variable on the demand side in the second half. In the first half, exports were strictly restricted due to spring farming supply protection policies. After June, a new round of export quotas was implemented. The subsequent execution pace of exports in the second half, including the actual release of quotas, adjustments to export guidance prices and willingness of the international market to receive cargoes, will directly determine the digestion path of domestic surplus capacity and become the core factor shaping market rhythm.

Overall: In the second half, the urea market will operate amid competition between rigid high supply and demand that is weak first and stronger later. Supply-demand fundamentals are expected to remain loose, and the market is likely to fluctuate within seasonal ranges. A sustained one-sided rally is unlikely. Upside room will continue to be capped by sufficient supply, while the execution pace of export policy will be the key variable affecting phased market movements.

In terms of prices, range-bound fluctuations are expected. The downside will be supported by coal-based production costs, while the upside will be jointly constrained by ample supply and policy regulation.