Urea Daily Review, July 16: High Inventory and Weak Demand Persist, Short-Term Low-Level Volatility Remains Unchanged

Domestic Urea Price Index

According to FDD data, on July 16, the small-granule urea price index stood at 1,828.18, down 4.09 from the previous working day, a decrease of 0.22% month-on-month, and up 0.34% year-on-year.

Urea Futures Market

Today, the UR2609 urea futures contract opened at 1,710, with a high of 1,716, a low of 1,690, a settlement price of 1,704, and a closing price of 1,693. The closing price was down 29 from the previous trading day’s settlement price, a decrease of 1.68%. The basis for the 09 contract in Shandong was 57. Open interest increased by 18,847 lots today, with total open interest standing at 319,936 lots.

Today, the urea futures market continued its weak and downward trend. The current market supply remains loose overall, with the industry’s high operating rates and high inventories unchanged. In addition, domestic agricultural and industrial demand has entered a phased off-season, terminal stocking willingness is weak, and market sentiment is cautious and soft. In the spot market, most enterprises had poor new-order transactions and slightly lowered quotations, continuously dragging down the board.

Export-side bullish factors have failed to materialize. Although policy conditions have loosened somewhat and a few orders have been concluded, overall port collection remains slow and actual export volumes are insufficient. The marginal effect of earlier export-related speculation has weakened, making it difficult to provide effective support to the futures market.

On the cost side, there is still some downside support, limiting the room for a deep decline, but without substantive bullish drivers, the board remains unable to reverse its weak pattern. Overall, urea is currently in a four-fold bearish environment of high supply, high inventories, weak domestic demand, and weak exports. The bearish logic is solid, and pessimism in the futures market remains strong. In the short term, the market is still likely to follow spot fundamentals and maintain a low-level, weakly volatile pattern. Going forward, attention should be paid to export policy changes, the start of autumn fertilizer preparation, and opportunities created by raw material cost fluctuations.

Spot Market Analysis

Today, the domestic urea spot market continued to operate weakly with fluctuations. Yesterday’s trading performance in the domestic urea market was average, mainstream market quotations were stable to lower, and trading sentiment remained light.

Although there is an export policy window, overall port collection is progressing slowly, and substantive export benefits have not yet been fully realized. This has not yet effectively alleviated domestic spot supply-demand pressure.

Overall, the supply side remains at high levels. Industry operating rates are elevated, overall supply is sufficient, and pressure from continued inventory accumulation persists. On the demand side, agricultural demand support remains limited. Terminal procurement is mainly based on phased rigid demand, with no concentrated volume formed, making it difficult to open further upside space. Industrial demand only maintains rigid-demand replenishment, with cautious procurement sentiment and generally light transactions.

In summary, urea market fundamentals are unlikely to improve significantly in the short term. The market is expected to remain stalemated and under pressure, with a relatively high probability of slight price loosening. Without sustained and substantive positive support such as large export orders, overall upside room for market prices remains limited, and the market is likely to continue operating in a weak and volatile pattern. Going forward, attention should be paid to the progress of summer fertilizer preparation and export policy developments.

Overall, the domestic urea spot market is currently operating in a weak pattern. On the supply side, industry capacity utilization remains high, daily output stays elevated, and some enterprise maintenance has had limited impact, leaving overall supply pressure relatively heavy. On the demand side, summer fertilizer demand has not yet recovered on a large scale, with only scattered topdressing demand in some regions. Downstream compound fertilizer, panel, melamine and other industrial sectors are operating weakly, with procurement mostly based on rigid demand, resulting in limited overall demand-side support. In terms of inventory, enterprise inventories continue to accumulate, and inventory pressure remains. On the policy side, realization of export-related benefits remains limited. Going forward, attention should be paid to the pace of autumn fertilizer preparation and the impact of export policy changes.

Specifically, prices in Northeast China remained stable at RMB 1,860-1,880/tonne. Prices in East China remained stable at RMB 1,750-1,810/tonne. Prices in Central China remained stable at RMB 1,760-1,900/tonne. Prices in North China remained stable at RMB 1,650-1,880/tonne. Prices in South China fell to RMB 1,820-1,900/tonne. Prices in Northwest China remained stable at RMB 1,860-1,950/tonne. Prices in Southwest China fell to RMB 1,680-2,080/tonne.

Market Updates

July 16: The reference receiving price for urea in the Guangzhou, Guangdong market was RMB 1,850-1,860/tonne, down from the previous working day.

July 16: The reference receiving price for urea in the Nanning, Guangxi market was RMB 1,820-1,830/tonne, down from the previous working day.

July 16: The reference receiving price for urea in the Shijiazhuang, Hebei market was RMB 1,780-1,800/tonne, down RMB 20/tonne from the previous working day.

July 16: The reference receiving price for urea in the Wen’an, Hebei market was RMB 1,770-1,800/tonne, down RMB 20/tonne from the previous working day.

July 16: Mainstream references for small- and medium-granule urea in the Shangqiu market were RMB 1,760-1,770/tonne, while large-granule references were around RMB 1,780-1,790/tonne.

July 16: Today, mainstream references for small-granule urea in the Jingmen market were RMB 1,760-1,770/tonne. Station self-pickup references were temporarily around RMB 1,730-1,750/tonne, while mainstream large-granule station self-pickup prices were RMB 1,800-1,810/tonne.

July 16: The ex-warehouse/truck pickup price in the Tieling, Liaoning market was RMB 1,860-1,880/tonne, flat from the previous working day.

July 16: The reference receiving price for urea in the Heze, Shandong market was around RMB 1,750-1,760/tonne, basically flat from the previous working day.

July 16: The reference receiving price for urea in the Linyi, Shandong market was RMB 1,750-1,760/tonne, basically flat from the previous working day.

July 16: Mainstream prices in the Xianyang market were RMB 1,840-1,860/tonne, flat from the previous working day.