November 10 Urea Daily: Expectations Rehyped, Reality Still Waiting

Domestic Urea Price Index:

According to FDD data estimates, on November 10 the urea small granular price index was 1,788.18, down 1.82 versus the previous working day, a month-on-month fall of 0.10% and a year-on-year rise of 8.26%.

Urea Futures Market:

Today the UR2701 contract opened at 1,725, with a high of 1,754, a low of 1,722, a settlement price of 1,739 and a closing price of 1,745. The closing price was up 20 versus the settlement price of the previous trading day, a month-on-month rise of 1.16%. The Shandong basis for the 01 contract was +5; the 01 contract saw open interest rise by 5,404 lots today, with current open interest at 266,851 lots.

Today the urea futures market as a whole ran on the firm side. The stronger board may reflect a sentiment reaction to market rumors that an Indian tender is about to be announced, while the spot market has continued a localized downtrend on weakening sentiment for the time being. However, given that spot declines are modest, that Indian tender expectations have not been fully disproved, and that expectations of supply reductions and reserve buying are still gradually strengthening as time passes, the supportive resonance of lower supply and higher demand remains in place, and the market is temporarily watching whether the Indian tender expectations materialize. Overall, the market currently has policy support as well as support from cost and export expectations; at the same time, as time passes, expectations for subsequent winter storage restocking will also gradually heat up. However, in the short term there is a lack of sufficiently strong demand drivers, so it remains difficult to reverse the fundamental pattern; the market is in a stage where fundamental reality and forward restocking expectations pull against each other, short-term incremental drivers remain limited, and overall sentiment is still fairly cautious. Overall, the urea futures market will remain rangebound in the absence of incremental drivers in the short term; going forward, watch supply reductions as winter sets in, the fulfillment of Indian tender expectations and the pace at which reserve demand is released.

Spot Market Analysis:

Today the domestic urea spot market was relatively weak in overall atmosphere, with some regions continuing to trim prices slightly, though the declines remain small and the willingness to cut prices is limited by the support of expected bullish factors ahead. Recently, expectations of resonance between export and reserve demand at home and abroad have kept overall market sentiment reasonably well supported; however, a cautious mood persists in the short term, willingness to chase prices higher after increases is not strong, and most participants are waiting to see how bullish expectations land. Looking at supply and demand fundamentals, overall supply is still fairly ample, but expectations that some plants may cut production as winter sets in continue to support the market; on the demand side, demand at the tail end of the agricultural fertilizer season is fairly limited, compound fertilizer and downstream industrial sectors mostly maintain low operating levels, and the release of substantive demand is limited. In the short term the market is mainly watching further fulfillment of export news and the rhythm of reserve demand. Overall, the urea market will remain rangebound in the short term; if new orders continue to fail to scale up and plant inventory pressure accumulates, further concessions to move cargo cannot be ruled out. However, the raw material side and the policy stance still provide bottom support; going forward, focus on the realization of favorable export developments and the pace of purchasing for real and reserve demand.

Overall, the domestic urea spot market is currently ranging. On the supply side, industry daily output is at a high level year on year, supply pressure from cargo is gradually accumulating, and overall supply remains ample. On the demand side, although terminal demand shows signs of improvement, its sustainability is not encouraging: downstream buyers maintain rigid-demand purchasing, agricultural fertilizer use is basically winding down, compound fertilizer and industrial operating rates have limited room to rise, and substantive demand release is weak. The market is currently in a stage where cost support and export diversion provide a floor while ample supply and demand exert pressure; although prices show signs of stabilizing and repairing in the short term, the drivers supporting a rebound mostly revolve around improved expectations, and after the pulse of sentiment there may still be a soft downward drift, though deep declines are likely to be limited; if prices fall back to relatively low levels, bargain-hunting by reserve and other demand may be released.

Specifically, prices in Northeast China were stable at 1,780-1,810 yuan/t. Prices in East China were lowered to 1,740-1,760 yuan/t. Prices in Central China were stable at 1,740-1,900 yuan/t. Prices in North China were stable at 1,650-1,830 yuan/t. Prices in South China were lowered to 1,840-1,870 yuan/t. Prices in Northwest China were stable at 1,860-1,910 yuan/t. Prices in Southwest China were stable at 1,650-1,900 yuan/t.

Urea Small Granular Market Quotations (yuan/t)

Market News and Updates:

Nov 10: The Guangzhou market in Guangdong quoted urea pickup reference prices at 1,850-1,860 yuan/t, flat versus the previous working day.

Nov 10: The Nanning market in Guangxi quoted urea pickup reference prices at 1,860-1,870 yuan/t, up 10 yuan/t versus the previous working day.

Nov 10: The Shijiazhuang market in Hebei quoted urea pickup reference prices at 1,740-1,800 yuan/t, down 20 yuan/t versus the previous working day.

Nov 10: The Wen'an market in Hebei quoted urea pickup reference prices at 1,750-1,800 yuan/t, down 20 yuan/t versus the previous working day.

Nov 10: The Shangqiu market quoted mainstream medium and small granular urea at 1,740-1,750 yuan/t, with large granular at around 2,040-2,050 yuan/t.

Nov 10: The Jingmen market quoted mainstream medium and small granular urea at 1,740-1,750 yuan/t, with large granular at 2,020-2,030 yuan/t.

Nov 10: The Tieling market in Liaoning quoted ex-warehouse/pickup prices at 1,780-1,800 yuan/t, flat versus the previous working day.

Nov 10: The Heze market in Shandong quoted urea pickup reference prices at around 1,740-1,750 yuan/t, down 10 yuan/t versus the previous working day.

Nov 10: The Linyi market in Shandong quoted urea pickup reference prices at 1,740-1,760 yuan/t, down 10 yuan/t versus the previous working day.