September 22 Urea Daily Review: Futures and Spot Prices Trade Weakly in a Narrow Range as Loose Supply-Demand Conditions Vie with Export Expectations

Domestic Urea Price Index:

According to FDD data calculations, the urea small-granule price index was 1,783.18 on September 22, down 1.82 points from the previous working day, down 0.10% sequentially and up 5.68% year on year.

Futures Market Analysis:

Today's urea UR2701 contract opened at 1,765, reached a high of 1,767, a low of 1,758, settled at 1,762 and closed at 1,762. The close was unchanged from the previous trading day's settlement, representing a sequential change of -0.00%. The basis for the January contract in Shandong was -12. Open interest in the January contract increased by 2,064 lots today, bringing current open interest to 250,143 lots.

Today's urea futures market traded within a narrow range, with price movements mainly reflecting a battle against spot-market fundamentals. On the one hand, the market has improved expectations for subsequent export shipments, while upstream raw-material costs are providing a degree of floor support and offering some downside protection to futures prices. On the other hand, the market is concerned that the gradual restart of production units will increase supply, while downstream compound-fertilizer raw-material procurement remains weak. Agricultural fertilizer stockpiling has not generated effective demand, and the weak domestic-demand pattern has not yet improved significantly. With the National Day holiday approaching, producers have an incentive to accelerate order collection and shipments before the holiday. However, after spot companies offered discounts and cut prices, actual transactions did not improve significantly. News related to export quotas has largely been priced in, while the postponement of shipment schedules has weakened the marginal bullish impact from that factor. Futures and spot prices are currently showing a clear linkage, with softer spot quotations transmitting upward to the futures market. Overall, urea futures lack a clear trend direction in the short term. The market is caught between export-expectation disturbances and weak underlying fundamentals, and is expected to continue consolidating within a weak range. Going forward, attention should remain on the actual implementation and timing of export quotas, improvement in spot transactions and the start of autumn fertilizer demand.

Spot Market Analysis:

Today's domestic spot urea market was stable to weak. With the National Day holiday approaching, producers are seeking to collect orders in advance and accelerate shipments before the holiday, but end-user demand has not improved significantly. Downstream buyers are still purchasing mainly to meet essential needs, and large-scale restocking has not yet begun. At the same time, production units that were previously under maintenance are gradually resuming operations, pushing up daily industry output and gradually increasing supply pressure. Spot prices still have room to soften further. Most companies kept their quotations stable today, while new-order transactions remained poor and a few companies slightly lowered quotations to attract orders. From the supply-demand perspective, overall supply remains relatively ample. On the demand side, agricultural autumn fertilizer stockpiling has not begun on a large scale, while operating rates in the compound-fertilizer and downstream industrial sectors have improved only marginally, leaving effective demand release weak. Overall, urea prices may soften in the short term. However, raw-material costs are providing floor support, and the diversion of export cargoes is also offering a supporting effect, limiting the room for a sharp decline. If prices fall to low levels, this may encourage buyers to purchase on dips and gradually lead to an increase in new orders. The market should continue to be monitored for follow-up on pre-holiday advance orders, the fulfillment of export shipments and the pace of downstream restocking.

Overall, the domestic spot urea market is undergoing weak consolidation. On the supply side, previously idled units are gradually resuming production, daily industry output has increased, supply pressure is accumulating and overall supply remains ample. On the demand side, although companies are seeking to collect orders and ship cargo before the National Day holiday, end-user demand has not improved significantly. Downstream buyers are still purchasing only to meet essential needs, agricultural autumn fertilizer stockpiling has not begun on a large scale, and operating rates in the compound-fertilizer and industrial sectors have improved only marginally. Effective demand release remains weak. The market is currently caught between cost support and the floor provided by export diversion on one side, and pressure from ample supply and weak demand on the other. Prices may continue to soften in the short term, but the room for a sharp decline is limited. If prices fall to low levels, buying-on-dips sentiment may be released. Going forward, close attention should be paid to follow-up on pre-holiday advance orders, the fulfillment of export shipments and downstream restocking.

In detail, prices in Northeast China were stable at RMB 1,790-1,810/tonne. Prices in East China were stable at RMB 1,740-1,780/tonne. Prices in Central China fell to RMB 1,730-1,920/tonne. Prices in North China fell to RMB 1,590-1,820/tonne. Prices in South China were stable at RMB 1,800-1,840/tonne. Prices in Northwest China were stable at RMB 1,860-1,910/tonne. Prices in Southwest China were stable at RMB 1,660-1,900/tonne.

Market Updates:

September 22: The Guangzhou, Guangdong, market's reference urea delivery price was RMB 1,820-1,840/tonne, unchanged from the previous working day.

September 22: The Nanning, Guangxi, market's reference urea delivery price was RMB 1,800-1,810/tonne, unchanged from the previous working day.

September 22: The Shijiazhuang, Hebei, market's reference urea delivery price was RMB 1,750-1,800/tonne, broadly unchanged from the previous working day.

September 22: The Wen'an, Hebei, market's reference urea delivery price was RMB 1,780-1,800/tonne, broadly unchanged from the previous working day.

September 22: The mainstream reference price for medium- and small-granule urea in Shangqiu was RMB 1,740-1,760/tonne, while the reference price for large-granule urea was around RMB 2,040-2,050/tonne.

September 22: The mainstream reference price for medium- and small-granule urea in Jingmen was RMB 1,740-1,750/tonne. Station pickup was around RMB 1,690-1,720/tonne, while the mainstream station pickup price for large-granule urea was RMB 2,020-2,030/tonne.

September 22: The Tieling, Liaoning, market's ex-warehouse/truck-loading price was RMB 1,790-1,810/tonne, unchanged from the previous working day.

September 22: The Heze, Shandong, market's reference urea delivery price was around RMB 1,730-1,750/tonne, broadly unchanged from the previous working day.

September 22: The Linyi, Shandong, market's reference urea delivery price was RMB 1,740-1,760/tonne, broadly unchanged from the previous working day.

September 22: The mainstream price in Xianyang was RMB 1,800-1,820/tonne, unchanged from the previous working day.