Urea Daily Review: Expectations of Reduced Production, Resilient Prices

Domestic Urea Price Index:

According to data from Feidoodoo, on December 4th, the price index for small granular urea was 2,514.09, a decrease of 7.41 compared to the previous Friday, a decrease of 0.29% on a week-on-week basis, and a decrease of 9.97% year-on-year.

Urea Futures Market:

The opening price for today's Urea UR2401 contract was 2,335, with a highest price of 2,344, a lowest price of 2,289, a settlement price of 2,311, and a closing price of 2,301. The closing price decreased by 22 compared to the previous trading day's settlement price, a decrease of 0.95% on a week-on-week basis, with a daily fluctuation range of 2,289-2,344. The price difference for the 01 contract in the Shandong region was 119. The 01 contract reduced its position by 16,821 lots today, with a total open interest of 130,819 lots as of now.

Spot Market Analysis:

Today, domestic urea prices underwent a slight downward adjustment, with most companies operating their facilities normally. With inventories at a low level, prices remained relatively stable. However, some companies reported moderate price reductions, with average new orders.

Specifically, prices in the Northeast region fell to 2,500-2,540 RMB/ton. Prices in the North China region declined to 2,320-2,550 RMB/ton. Prices in the Northwest region dropped to 2,460-2,470 RMB/ton. Prices in the Southwest region remained stable at 2,480-2,800 RMB/ton. Prices in the East China region decreased to 2,410-2,470 RMB/ton. In the Central China region, prices for small granules fell to 2,430-2,650 RMB/ton, while prices for large granules remained stable at 2,580-2,660 RMB/ton. Prices in the South China region declined to 2,610-2,660 RMB/ton.

Future Outlook:

On the factory side, new orders remained flat, and prices continued to experience slight adjustments, with some support from pending shipments, maintaining price stability. In the market, sentiment remained poor, and high-priced transactions were still weak. Buyers were not very active, and the market lacked sustained upward momentum, with prices showing some stagnation. In terms of supply, an increase in equipment failures and maintenance in recent days led to a downward trend in daily industry production and decreased output, providing some favorable support to the market. Regarding inventory, companies are gradually accumulating stocks, and the trend of accumulating stocks has narrowed due to an increase in equipment maintenance. In terms of demand, agricultural demand has been slow to follow, with many adopting a wait-and-see approach. Industrial demand has increased due to an increase in compound fertilizer production, leading to improved demand, and downstream intentions for replenishment exist. However, there is still resistance to high-priced purchases, and actual transaction prices are mostly at lower levels.

In summary, the current urea market has sluggish demand and low purchasing enthusiasm. However, with expectations of reduced production, prices remain resilient and stable. It is expected that urea market prices will continue to stabilize in the short term.