Post-Holiday Market Demand Follow-up: Urea Industry Continues to Improve

Introduction: During the May Day holiday, the demand for urea in the market was good, with an increase in new orders for enterprises. After the holiday, pending orders supported the companies, and the market demand followed suit. Additionally, with the expectation of reduced supply, manufacturers primarily upheld their prices, leading to a continuous and steady rise in quotations.

Urea Price Trend Analysis:

2024 Urea Small Granule Price Index Trend:

In April 2024, the urea market trended steadily upward. With some enterprises undergoing maintenance, supply slightly contracted while demand gradually improved. Manufacturers dispatched and fulfilled pre-received orders continuously, significantly reducing inventory. Although new orders gradually decreased later, most enterprises faced no pressure in shipments, and prices remained firm, with some manufacturers slightly relaxing their quotes, leading to a stable market adjustment.

As of April 30, 2024, the domestic urea small granule price index stood at 2258.77, a 7.51% decrease year-over-year.

After the May Day holiday, the agricultural sector saw periodic restocking for rice fertilization with relatively limited demand, leading to a cautious restocking sentiment and maintaining minimal on-demand purchasing. In contrast, the industrial compound fertilizer sector was in its peak nitrogen fertilizer production season, resulting in higher factory operations and substantial raw material procurement needs. This strong overall demand, along with some units entering maintenance, created favorable conditions for price increases.

As of May 13, 2024, the domestic urea small granule price index was 2340.45, down 1.56% year-over-year.

Market Price Trend from April 1, 2024, to May 13, 2024:

Looking at the trend of the urea small granule price index from April 1 to May 13, 2024, urea prices began to adjust upwards near the holiday. After the holiday, prices continued to rise, maintaining a high level of operation. Post-holiday market demand continued to follow suit, combined with reduced unit supply, created favorable conditions, continuously improving market transactions, and shifting the overall transaction focus upwards.

Industry Supply Analysis:

Daily Production:

As of May 12, 2024, the daily production of urea in China was approximately 185,200 tons, a 1.57% increase from the same period in 2023. Production trended downwards before the holiday, with units undergoing scheduled maintenance in April. Production declined on average throughout the month, with some recovery during the holiday. However, planned maintenance for subsequent units might continue, possibly leading to a further decline in daily production.

Unit Maintenance Status:

This month, unit maintenance was substantial, with production trending downwards as units began maintenance. This led to a short-term tight spot supply, favoring price increases throughout the month.

As of April 28, 2024, the operating rate in China's urea industry was about 81.70%, a 1.56% year-over-year decline.

As of May 12, 2024, the operating rate had risen to 85.52%, a 4.44% increase year-over-year.

Inventory Analysis:

Enterprise Inventory:

Before the holiday, urea enterprises had ample pre-received orders, leading to a gradual reduction in inventory. Coupled with reduced production, inventory decreased; after the holiday, with improved demand and active downstream purchasing, new orders continued to follow, leading to further inventory reduction amid reduced supply and increased demand, keeping current enterprise inventory at low levels.

As of May 12, 2024, inventory in China's urea industry stood at 502,800 tons, a decrease of 534,600 tons year-over-year, down 51.53%.

Port Inventory:

Export policy controls remain in place, with current international prices low and limited profit margins for domestic exports, resulting in minimal enterprise inclination to gather at ports, leading to large and small interval adjustments at the port.

As of May 12, 2024, port inventory in China's urea industry was 195,000 tons, an increase of 69,000 tons year-over-year, up 54.76%; large granule port inventory stood at 124,000 tons, an increase of 99,000 tons year-over-year; small granule port inventory was 71,000 tons, a decrease of 30,000 tons year-over-year.

Urea Market Future Outlook:

Factories: New orders for manufacturers are gradually decreasing, with pending orders being executed sequentially. Sales pressure is not prominent, with prices remaining firm. Some mainstream regional manufacturers face tight spot supplies, currently maintaining firm pricing.

Market: New order transactions in the market are slowing down, with limited enthusiasm for pursuing high prices, leading to a weak trading sentiment and a temporary market stalemate.

Supply: As enterprise maintenance plans approach this month, spot market supply is tight, with the industry's operating trends and daily production decreasing.

Demand: Agricultural demand continues to follow essential needs with limited on-demand purchasing; industrial compound fertilizer factories remain in the peak summer nitrogen fertilizer production period, with essential procurement needs continuing to follow.