Urea Daily Review, July 29: Export Expectations Contend with Weak Fundamentals; Futures Edge Higher While the Spot Market Remains Under Pressure

Domestic Urea Price Index:

According to FDD data calculations, the small-granule urea price index stood at 1,822.27 on July 29, down 1.82 points or 0.10% from the previous working day, but up 0.94% year on year.

Urea Futures Market:

The UR2609 urea futures contract opened at 1,745 today, reached a high of 1,754 and a low of 1,736, and settled at 1,744 before closing at 1,742. The closing price was up 8 points, or 0.46%, from the previous trading day’s settlement price. The September contract’s basis in Shandong was RMB 8/tonne. Open interest in the September contract decreased by 1,416 lots to 248,721 lots.

Urea futures fluctuated at relatively firm levels today. Market sentiment was primarily supported by export expectations, with participants anticipating that India’s upcoming tender could generate additional export demand and ease the pressure from rising domestic inventories. Firm international market prices and continuing geopolitical disruptions also provided some support to domestic sentiment. However, the limited improvement in actual exports has been insufficient to generate further upward momentum, leaving futures in a narrowly firmer trading pattern.

From a fundamental perspective, the supply-demand imbalance remains pronounced. Industry capacity utilization continues to run at a high level, maintaining ample supply, while producers’ inventories continued to accumulate this week and exert pressure on spot prices. Demand also remained weak, with slow procurement from both the industrial and agricultural sectors, limited new-order transactions and generally subdued market activity.

Overall, urea futures are likely to remain range-bound until the direction of export policy becomes clearer and actual export volumes are confirmed. The duration and extent of any rebound will still depend on the materialization of substantive positive factors. The market should closely monitor export policy changes, the start of autumn fertilizer stocking and fluctuations in feedstock costs for potential short-term trading opportunities.

Spot Market Analysis:

China’s domestic urea spot market remained weak today. New-order transactions at most producers were still limited, and trading sentiment was subdued. Some producers slightly lowered their quotations to attract orders. In the absence of substantive positive support, the current pattern of high supply and weak demand is unlikely to improve. Urea producers’ inventories also continued to build this week, further increasing their shipment pressure.

On the supply side, production remained high, with industry operating rates at elevated levels. Overall availability was ample, and producers continued to face inventory pressure. On the demand side, regional differences in agricultural top-dressing demand were evident, but no concentrated procurement emerged to support a price increase. Industrial buyers continued to replenish only on a need-based basis, with cautious purchasing sentiment and limited overall transactions.

Overall, urea market fundamentals are unlikely to improve significantly in the short term. Without unexpected positive developments, such as the placement of sustained and substantive large export orders, the market will struggle to remain stable, and prices are likely to soften slightly. Attention should subsequently focus on the progress of agricultural fertilizer application and developments in export policy.

In general, China’s domestic urea spot market is currently consolidating within a narrow range. On the supply side, industry capacity utilization remains high, daily production is elevated, and plant maintenance has had only a limited impact, resulting in substantial overall supply pressure. In terms of demand, no new large-scale agricultural demand has emerged, and regional differences remain evident. Operating rates in downstream industrial sectors, including compound fertilizer and melamine, are relatively low, while procurement is primarily limited to rigid demand, providing little overall demand-side momentum.

Producers’ inventories continue to accumulate, leaving inventory pressure in place. Although the market retains expectations for exports, few substantive large orders have materialized, and the extent to which overseas sales can absorb domestic supply remains to be seen. The market should closely monitor the results of India’s urea tender, changes in exports and the timing of autumn fertilizer stocking.

By region, prices in Northeast China remained stable at RMB 1,860-1,880/tonne. Prices in East China stood at RMB 1,740-1,800/tonne. Prices in Central China declined to RMB 1,740-1,900/tonne. Prices in North China remained at RMB 1,650-1,800/tonne. Prices in South China remained at RMB 1,800-1,900/tonne. Prices in Northwest China remained at RMB 1,860-1,950/tonne, while prices in Southwest China were stable at RMB 1,680-2,080/tonne.

Market Updates:

July 29: The reference receiving price for urea in Guangzhou, Guangdong, was RMB 1,860-1,870/tonne, unchanged from the previous working day.

July 29: The reference receiving price for urea in Nanning, Guangxi, was RMB 1,800-1,810/tonne, unchanged from the previous working day.

July 29: The reference receiving price for urea in Shijiazhuang, Hebei, was RMB 1,780-1,800/tonne, broadly unchanged from the previous working day.

July 29: The reference receiving price for urea in Wen’an, Hebei, was RMB 1,780-1,800/tonne, broadly unchanged from the previous working day.

July 29: Mainstream reference prices for small- and medium-granule urea in Shangqiu were RMB 1,760-1,770/tonne, while large-granule urea was quoted at approximately RMB 1,790-1,800/tonne.

July 29: Mainstream reference prices for small- and medium-granule urea in Jingmen were RMB 1,740-1,750/tonne. Ex-rail-siding pickup prices were temporarily assessed at approximately RMB 1,700-1,710/tonne, while mainstream ex-rail-siding pickup prices for large-granule urea were RMB 1,800-1,810/tonne.

July 29: Reference ex-warehouse/truck-pickup prices in Tieling, Liaoning, were RMB 1,860-1,880/tonne, unchanged from the previous working day.

July 29: The reference receiving price for urea in Heze, Shandong, was approximately RMB 1,740/tonne, broadly unchanged from the previous working day.

July 29: The reference receiving price for urea in Linyi, Shandong, was RMB 1,750/tonne, broadly unchanged from the previous working day.

July 29: Mainstream reference prices in Xianyang were RMB 1,840-1,860/tonne, unchanged from the previous working day.