August 3 Urea Daily Review: Second Batch of Export Quotas Falls Short of Expectations, Urea Market Returns to Weak Physical-Market Logic

Domestic Urea Price Index:

According to Feidoodoo data, on August 3, the small-granular urea price index was 1,809.09, down 2.27 from the previous working day, down 0.13% month on month, and up 0.42% year on year.

Urea Futures Market:

Today, the urea UR2609 contract opened at 1,718, reached a high of 1,718 and a low of 1,660, settled at 1,680, and closed at 1,666. The closing price was down 66 from the previous trading day's settlement price, a decline of 3.81%. The basis for the 09 contract in Shandong was +84. Open interest in the 09 contract increased by 26,652 lots today, with total open interest currently at 274,947 lots.

The main urea futures contract fell sharply today, and market sentiment weakened noticeably. Last Friday, relevant authorities approved the second batch of urea export quotas, but the quantity was lower than market expectations. The earlier rebound on the futures board had already partly priced in this positive factor, so the boost was limited after expectations were realized. International prices also came under pressure and pulled back, while expectations of shrinking export profits weighed on the market. With domestic bullish factors exhausted and off-season demand weak, physical-market pressure dominated the trend as the main contract approached delivery. In the spot market, weekend transactions were average. Most producers lowered offers slightly to encourage new orders, but the effect was limited. Fundamentally, the supply-demand contradiction remained prominent. On the supply side, industry capacity utilization stayed high, daily output remained ample, and producer inventories continued to accumulate, placing continuous pressure on spot prices. On the demand side, agricultural and industrial purchasing was slow, new transactions were thin, and overall trading sentiment was weak. Overall, after export expectations were realized, the market returned to weak physical-market logic. Under the off-season pattern of strong supply and weak demand, futures prices are expected to remain weak in the short term. Later, attention may focus on the start of autumn fertilizer stockbuilding and marginal changes in raw material costs, which could bring staged rebound opportunities.

Spot Market Analysis:

China's domestic urea spot market ran weakly today. Last Friday, relevant authorities approved the second batch of urea export quotas, but the quantity was lower than market expectations and provided only limited support. Most producers saw average new orders over the weekend, market trading sentiment was poor, and some producers lowered offers slightly to promote transactions. Overall, supply remains high. Industry operating rates are elevated, supply is generally ample, and producer inventory pressure persists. On the demand side, agricultural top-dressing demand is clearly divided by region and has not formed concentrated purchasing support, making it difficult to create room for a price increase. Industrial demand is limited to essential replenishment, with cautious buying and thin overall transactions. Overall, urea market fundamentals are unlikely to improve significantly in the short term. Without sustained and substantial export orders or other unexpected positive support, the market will find it difficult to remain stable, and prices are likely to loosen slightly. Further attention should be paid to the pace of agricultural fertilizer demand and the recovery in operating rates at compound fertilizer producers.

Overall, the domestic urea spot market is currently consolidating within a narrow range. On the supply side, industry capacity utilization remains high, daily output stays elevated, and equipment maintenance has limited impact, leaving overall supply pressure relatively large. On the demand side, agricultural demand has not yet produced a new large-scale fertilizer-use support, and regional differences are obvious. Industrial demand from downstream compound fertilizer, melamine, and other sectors remains weak, with purchases mainly for essential needs and limited overall demand drivers. In terms of inventories, producer stocks continue to accumulate and inventory pressure remains. On the export side, the market still holds expectations, but substantial large orders remain limited and the strength of export diversion still needs to be observed. Later, attention should focus on the results of India's urea tender, normal changes in exports, and the impact of the autumn fertilizer stockbuilding schedule.

By region, prices in Northeast China were stable at RMB 1,830-1,860/tonne. Prices in East China fell to RMB 1,730-1,790/tonne. Prices in Central China were stable at RMB 1,740-1,900/tonne. Prices in North China were stable at RMB 1,620-1,860/tonne. Prices in South China fell to RMB 1,800-1,880/tonne. Prices in Northwest China were stable at RMB 1,860-1,950/tonne. Prices in Southwest China were stable at RMB 1,680-2,080/tonne.

Market Updates:

August 3: In Guangzhou, Guangdong, the reference receiving price for urea was RMB 1,850-1,860/tonne, unchanged from the previous working day.

August 3: In Nanning, Guangxi, the reference receiving price for urea was RMB 1,800-1,820/tonne, up from the previous working day.

August 3: In Shijiazhuang, Hebei, the reference receiving price for urea was RMB 1,760-1,780/tonne, basically unchanged from the previous working day.

August 3: In Wen'an, Hebei, the reference receiving price for urea was RMB 1,750-1,770/tonne, basically unchanged from the previous working day.

August 3: In Shangqiu today, the mainstream reference price for small and medium granules was RMB 1,750-1,760/tonne, while large granules were around RMB 1,820-1,830/tonne.

August 3: In Jingmen today, the mainstream reference price for small and medium granules was RMB 1,740-1,750/tonne, station self-pickup was temporarily around RMB 1,700-1,710/tonne, and mainstream large-granule station self-pickup was RMB 1,800-1,810/tonne.

August 3: In Tieling, Liaoning, ex-warehouse/truck pickup prices were referenced at RMB 1,840-1,860/tonne, unchanged from the previous working day.

August 3: In Heze, Shandong, the reference receiving price for urea was around RMB 1,720-1,740/tonne, down RMB 20/tonne from the previous working day.

August 3: In Linyi, Shandong, the reference receiving price for urea was RMB 1,750/tonne, basically unchanged from the previous working day. August 3: In Xianyang, the mainstream reference price was RMB 1,840-1,860/tonne, unchanged from the previous working day.