Urea Daily Review, July 1: Demand Improvement Is Hard to Sustain, Urea Lacks Upside Momentum

Domestic Urea Price Index

According to FDD data, the domestic small granular urea price index stood at 1,849.09 on July 1, up 1.36 from the previous working day, representing an increase of 0.07% from the previous working day and an increase of 0.27% year-on-year.

Urea Futures Market

Today, the urea UR2609 contract opened at 1,730, with an intraday high of 1,734 and a low of 1,720. The settlement price was 1,726, and the closing price was 1,723, down 17 from the previous trading day’s settlement price, representing a decline of 0.98%. The Shandong basis for the September contract was +87. Open interest increased by 7,596 lots today, bringing total open interest to 297,328 lots.

The urea futures market showed a weak and volatile trend today. Short-term demand follow-through remained insufficient. As transactions softened, some upstream producers with relatively high quotations slightly lowered prices, and alongside another substantial inventory build during the week, market sentiment remained generally weak but stable.

On the supply side, pressure remains the core factor weighing on the board. Industry operating rates continue to stay at historically absolute highs, daily output remains elevated, and the successive commissioning of new capacity further strengthens the loose supply pattern.

On the demand side, conditions show marginal improvement, but the strength is limited. Agricultural shipments in mainstream regions improved, and lower-end transactions saw some volume increase, but industrial demand remains mainly based on need-only procurement and has not yet formed an effective wave of concentrated buying. Overall, the improvement on the demand side is mainly reflected in phased replenishment, and sustainability still needs to be observed.

Overall, the urea market is showing signs of recovery in summer fertilizer demand, but the loose supply-demand pattern is difficult to reverse in the short term. Pressure from high operating rates and high inventories is expected to continue, and the seasonal off-season expectation on the main contract remains unchanged, leaving limited upward momentum for the board. Going forward, attention should be paid to the pace of summer fertilizer demand and the timing of an inventory turning point.

Spot Market Analysis

The domestic urea spot market remained stable today, with some regions seeing slight downward adjustments in quotations. The price center moved slightly lower, but the overall price level did not show any further obvious decline. Low-end transactions in mainstream regions saw some volume improvement. Supported by some release in local agricultural demand, the approaching summer fertilizer season provided some lift to market sentiment, and downstream inquiry activity increased slightly compared with the previous period. Some producers saw better new order shipments, indicating some bottom support.

However, overall agricultural demand support remains limited. End-user procurement is still mainly driven by phased rigid demand and has not formed concentrated volume, making it difficult to provide sustained upward momentum for prices.

On the supply side, production remains at a high level. Industry operating rates are still elevated, overall supply remains abundant, and pressure from continued inventory accumulation persists. In terms of industrial demand, compound fertilizer producers continue to purchase only small volumes based on demand, mainly buying raw materials on a hand-to-mouth basis, with no large-scale restocking observed.

Overall, the short-term market lacks clear driving factors. The core loose supply-demand pattern has not changed, while high operating rates and continued inventory accumulation continue to pressure prices. Without new positive factors, the spot market is expected to maintain a narrow range of fluctuations. Going forward, attention should be paid to the progress of summer fertilizer demand and changes in export policy.

Overall, the domestic urea spot market is currently operating in a range-bound, slightly weak pattern. On the supply side, industry capacity utilization remains high, daily output continues to run at elevated levels, and overall supply pressure is relatively high. On the demand side, summer fertilizer demand has not yet recovered on a large scale, with only sporadic topdressing demand in some areas. Downstream industrial sectors such as compound fertilizer, panels and melamine remain weak in operating rates, with procurement mainly driven by rigid demand, leaving overall demand support limited.

In terms of inventories, softer market demand has slowed shipments, resulting in continued rapid inventory accumulation at producers. Inventory pressure remains in place. On the policy side, the moderate relaxation of export quotas is only a structural adjustment during the off-season and is unlikely to change the domestic oversupply pattern. Going forward, attention should be paid to export shipment progress, the release of summer topdressing demand and fluctuations in coal costs.

By region, prices in Northeast China remained stable at RMB 1,870-1,920/tonne. Prices in East China remained stable at RMB 1,780-1,860/tonne. Prices in Central China remained stable at RMB 1,780-1,920/tonne. Prices in North China remained stable at RMB 1,670-1,910/tonne. Prices in South China remained stable at RMB 1,860-1,930/tonne. Prices in Northwest China were raised to RMB 1,780-1,820/tonne. Prices in Southwest China remained stable at RMB 1,720-2,100/tonne.

Market Updates

July 1: The urea receiving price in the Guangzhou market, Guangdong, was quoted at RMB 1,860-1,880/tonne, flat from the previous working day.

July 1: The urea receiving price in the Nanning market, Guangxi, was quoted at RMB 1,870-1,880/tonne, flat from the previous working day.

July 1: The urea receiving price in the Shijiazhuang market, Hebei, was quoted at RMB 1,830-1,840/tonne, basically flat from the previous working day.

July 1: The urea receiving price in the Wen’an market, Hebei, was quoted at RMB 1,820-1,830/tonne, basically flat from the previous working day.

July 1: Mainstream industrial ex-factory prices in Henan were around RMB 1,740-1,750/tonne. In the Shangqiu market, mainstream small and medium granular urea prices were quoted at RMB 1,790-1,810/tonne, while large granular urea was quoted at around RMB 1,780-1,790/tonne.

July 1: In the Jingmen market, mainstream small and medium granular urea prices were quoted at RMB 1,770-1,790/tonne. Self-pickup prices at railway platforms were temporarily quoted at around RMB 1,730-1,750/tonne, while mainstream large granular urea self-pickup prices at railway platforms were RMB 1,860-1,870/tonne.

July 1: Ex-warehouse / truck pickup prices in the Tieling market, Liaoning, were quoted at RMB 1,880-1,920/tonne, flat from the previous working day.

July 1: The urea receiving price in the Heze market, Shandong, was quoted at around RMB 1,780-1,790/tonne, basically flat from the previous working day.

July 1: The urea receiving price in the Linyi market, Shandong, was quoted at RMB 1,800-1,810/tonne, basically flat from the previous working day.

July 1: Mainstream prices in the Xianyang market were quoted at RMB 1,780-1,820/tonne, up from the previous working day.