Summary of the Urea Market in Q4 of 2023

Analysis of the Chinese Urea Market:

The fourth quarter witnessed a downturn in demand in the urea market, resulting in overall low demands with minimal and need-based ordering.

According to Feidoodoo data, the domestic small particle urea price index peaked at 2624.68 and bottomed at 2432.09, a difference of 192.59, marking a fluctuation of 7.92%. The highest index occurred in early November, while the lowest was in mid-October. The fourth quarter showed a rise-and-fall trend in prices, with minor overall fluctuations, characterized by slight range oscillations.

In October, domestic urea enterprises operated at high rates above 80% to ensure supply, making price increases difficult amidst high production. The continuation of supply and legal inspections impacted the domestic market, and participation in the new round of Indian tenders was challenging. Factory quotations were under pressure to increase, and prices mostly ran firmly. As the agricultural demand market ended and Indian tender goods were shipped, supply tensions eased, prices weakened, and mainstream regional market prices declined.

In November, the market initially saw robust demand, leading to substantial orders for factories. With low inventory levels, many factories intended to stock up, raising factory prices to control orders, showing a reluctant selling attitude. The market predominantly saw high-priced transactions, with low-priced sources being scarce. The pace of purchasing slowed. The phosphorus compound fertilizer conference later led to a calmer market, and after its conclusion, extended export inspections and a joint effort by fertilizer enterprises to stabilize prices impacted the market. Spot market prices faced pressure, transactions were lukewarm, and downstream factories made minimal stock purchases.

In December, with the agricultural market in a demand gap and industrial demand seeking low prices, market sentiment to buy high was not strong. Limited pursuit of high prices under supply policies and downstream low-entry purchases led to sluggish high-price transactions and slightly firm prices. Factories faced reduced pending orders and export impacts, leading to price adjustments, but reductions were limited due to low inventory and upcoming gas head plant maintenance, reducing daily production.

China Urea Production and Operating Rate Statistics:

Analysis of China's Urea Production:

Feidoodoo data shows that from January to December 2023, China's cumulative urea production was 6107.63 million tons, a year-over-year increase of 469.39 million tons (8.33%). The initial fourth quarter saw peak production but later reduced slightly due to production-limiting policies.

Statistics on the Operating Rate of China's Urea Industry:

For January to December 2023, the average operating rate was 79.27%, up 13.54% from the previous year. Gas head enterprises averaged 71.91%, coal head enterprises 81.06%, large granule plants 78.38%, and small and medium granule plants 78.83%. The fourth quarter maintained high fluctuations in operating rates, with some gas head plants undergoing routine maintenance, but overall rates didn’t significantly drop.

Analysis of China's Urea Import and Export Data:

Fourth Quarter Urea Export Analysis:

Customs data indicates that from January to November 2023, the cumulative export total was 391.11 million tons, an increase of 161.42 million tons (70.28%) over last year.

Analysis of Apparent Consumption of Urea in the Fourth Quarter:

Feiduoduo data shows that from January to November 2023, China's apparent urea consumption totaled 5280.18 million tons, up 323.23 million tons (6.52%) from the previous year.

Statistics on China's Urea Inventory:

Fourth Quarter Large Granule Urea Port Inventory Trend:

According to Feidoodoo data, at the end of the fourth quarter of 2023, the inventory was about 10.70 million tons, up 2.00 million tons (22.99%) from the previous quarter and up 0.70 million tons (7.00%) year-over-year.

Fourth Quarter Small Granule Urea Port Inventory Trend:

The data shows an inventory of 8.20 million tons, up 0.60 million tons (7.89%) from the previous quarter and down 0.80 million tons (8.89%) year-over-year.

Total Market Inventory Trend for the Fourth Quarter:

At the end of the fourth quarter of 2023, the enterprise inventory was about 57.80 million tons, down 31.59% from the same period last year. Port inventory totaled 18.90 million tons, up 56.20% year-over-year, with a combined inventory of 76.70 million tons, down 19.89 million tons from last year.

Market Forecast for the First Quarter of 2024:

Supply Aspect: Given the current situation of urea enterprises, gas head plants are undergoing seasonal maintenance. January's daily urea production is expected to run low until it gradually recovers to above 16 million tons by the end of the month.

Demand Aspect: Due to the off-season impact, winter stockpiling still has gaps, and the downstream market maintains minimal need-based restocking, awaiting suitable prices for market entry.

Export Aspect: Export confidence cools due to strict legal inspections and low international prices, focusing more on domestic supply. Policy and price differential situations should be monitored.

Overall: With the off-season impact, demand follow-up willingness is low. The domestic urea market in the first quarter of 2024 is expected to face difficulties in price increases due to low demand and export challenges, continuing in a weak state.