August 20 Urea Daily Review: Spot and Futures Markets Strengthen on Supportive Expectations

Domestic Urea Price Index:

According to Feidoodoo data, the small-granular urea price index was 1,775.91 on August 20, up 5.91 from the previous working day, up 0.33% month on month and down 1.34% year on year.

Urea Futures Market:

Today, the UR2701 urea contract opened at 1,746, reached a high of 1,764 and a low of 1,746, settled at 1,755, and closed at 1,759. The closing price was 14 yuan higher than the previous trading day's settlement price, up 0.80%. The January contract's basis in Shandong was -39 yuan/tonne. Open interest in the January contract increased by 12,743 lots today to 230,009 lots.

Urea futures continued to trade with a volatile but firm tone today. On the spot side, producers offering at the lower end of the price range recorded acceptable new-order transactions, showing a stronger willingness to support prices, while market trading sentiment improved slightly. On the supply side, expectations of plant maintenance and the diversion of cargoes to exports provided phased bullish support, although weak domestic demand fundamentals limited upside potential. Looking at the overall supply-demand balance, domestic spot supply remains ample and inventory pressure at producers has not been materially relieved. Although producer inventories declined slightly this week, overall inventory levels remain high. Demand remains clearly differentiated: agricultural topdressing demand is limited to sporadic purchases in certain regions and has not generated concentrated buying; industrial downstream buyers continue to procure only for rigid demand, while compound fertilizer plants are operating at low rates. Weak spot transactions further limit the room for futures prices to rebound. Overall, urea futures are expected to remain in a volatile adjustment pattern amid the balance between weak fundamentals and expectations of improvement. The market should closely monitor the implementation of production cuts from plant maintenance, export order fulfilment, and signs of marginal demand improvement from autumn fertilizer procurement.

Spot Market Analysis:

The domestic urea spot market remained firm and relatively strong today. Although overall downstream demand remains average, expectations of maintenance shutdowns and exports are providing support. Some producers at the lower end of the price range recorded strong new-order sales and showed a strong willingness to support prices, raising ex-factory quotations slightly today. However, the underlying supply-demand imbalance has not eased. On the supply side, the industry's operating rate remains high year on year, supply is abundant, and inventory pressure persists. On the demand side, agricultural topdressing demand varies by region and has not formed concentrated purchasing support. Industrial users are only maintaining rigid-demand procurement, compound fertilizer operating rates remain low, purchasing intensity is average, downstream buyers are cautious, and total transactions remain limited. Overall, downstream demand is unlikely to improve significantly. However, some producers in key regions will enter maintenance periods in late August, exports continue to move, and certain producers have started or plan to implement production cuts. Whether the market has entered a bottoming range remains to be seen. The market is expected to maintain a relatively strong and volatile trend in the short term. Attention should focus on the actual implementation of supply reductions and changes in policy and market news.

Overall, the domestic urea spot market is maintaining a relatively strong and volatile trend. Industry operating rates remain high, supply is ample, and inventory pressure continues to build. However, some producers plan maintenance shutdowns and output reductions in late August, while export shipments remain smooth, providing marginal support to the spot market. Stronger futures prices are also reinforcing producers' willingness to support prices. On the demand side, agricultural topdressing demand remains regionally differentiated and has not generated concentrated procurement. Industrial demand is limited to rigid-demand buying, compound fertilizer operating rates remain low, downstream buyers are cautious, and transaction volumes remain limited. The core contradiction of loose supply and demand fundamentals has not been materially reversed. Upward momentum is mainly coming from expectations of supply reductions and export diversion. Attention should remain on the implementation of maintenance-related output cuts, the pace of export order execution, and marginal changes arising from the start of autumn fertilizer procurement.

Specifically, prices in Northeast China were stable at 1,790-1,820 yuan/tonne. Prices in East China rose to 1,700-1,740 yuan/tonne. Prices in Central China rose to 1,720-1,900 yuan/tonne. Prices in North China rose to 1,580-1,800 yuan/tonne. Prices in South China rose to 1,800-1,840 yuan/tonne. Prices in Northwest China were stable at 1,860-1,910 yuan/tonne. Prices in Southwest China were stable at 1,680-2,000 yuan/tonne.

Market Updates:

August 20: In Guangzhou, Guangdong, the reference delivered price for urea was 1,830-1,840 yuan/tonne, up from the previous working day.

August 20: In Nanning, Guangxi, the reference delivered price for urea was 1,800-1,810 yuan/tonne, up from the previous working day.

August 20: In Shijiazhuang, Hebei, the reference delivered price for urea was 1,740-1,750 yuan/tonne, up 10 yuan/tonne from the previous working day.

August 20: In Wen'an, Hebei, the reference delivered price for urea was 1,730-1,740 yuan/tonne, up 10 yuan/tonne from the previous working day.

August 20: In Shangqiu, mainstream reference prices for small and medium granules were 1,730-1,740 yuan/tonne, while large-granular urea was quoted at around 1,820-1,830 yuan/tonne.

August 20: In Jingmen, mainstream reference prices for small and medium granules were 1,720-1,730 yuan/tonne. Self-pickup prices at railway terminals were temporarily referenced at around 1,690-1,700 yuan/tonne, while mainstream self-pickup prices for large granules at railway terminals were 1,800-1,810 yuan/tonne.

August 20: In Tieling, Liaoning, ex-warehouse/vehicle-loading prices were referenced at 1,780-1,800 yuan/tonne, unchanged from the previous working day.

August 20: In Heze, Shandong, the reference delivered price for urea was around 1,700-1,710 yuan/tonne, up 10 yuan/tonne from the previous working day.

August 20: In Linyi, Shandong, the reference delivered price for urea was 1,720-1,730 yuan/tonne, up 10 yuan/tonne from the previous working day.

August 20: In Xianyang, mainstream prices were referenced at 1,800-1,820 yuan/tonne, unchanged from the previous working day.