Urea Daily Review: Weakening Enthusiasm for Higher Prices, Market Prices Decline and Adjust

Domestic Urea Price Index:

According to Feidoodoo data, on May 20, the small granular urea price index was 2384.41, a decrease of 9.55 from last Friday, reflecting a 0.40% week-on-week decline and a 4.58% year-on-year increase.

Urea Futures Market:

Today, the opening price for the UR409 urea futures contract was 2138, with a high of 2238, a low of 2091, a settlement price of 2162, and a closing price of 2237. The closing price increased by 91 from the previous trading day’s settlement price, up by 4.24%. The price fluctuation range for the day was 2091-2238. The basis for the 09 contract in the Shandong region was 123. The 09 contract saw an increase of 13295 lots in open interest today, bringing the total to 254399 lots.

Today, urea futures prices opened lower and moved higher, with no significant changes in fundamentals. The price increase in the afternoon was mainly driven by funds influenced by geopolitical risks. In the spot market, sustained high prices have led to a gradual decrease in downstream procurement willingness. Manufacturers slightly reduced their prices, but positive factors still provide some support. In the short term, it is advisable to observe whether the recent price rally in futures can rekindle positive feedback in the cooling spot market, while also being mindful of potential regulatory pressures following sharp price increases.

Spot Market Analysis:

Today, the domestic urea market saw prices ease and decline. The market has reached high levels, and the willingness of traders to chase higher prices has weakened, leading to lower quotations by enterprises to secure orders.

• Northeast: Prices stable at 2300-2380 yuan/ton.
• East China: Prices dropped to 2350-2400 yuan/ton.
• Central China: Small and medium granular prices fell to 2340-2450 yuan/ton, and large granular prices decreased to 2300-2370 yuan/ton.
• North China: Prices fell to 2200-2380 yuan/ton.
• South China: Prices decreased to 2440-2490 yuan/ton.
• Northwest: Prices stable at 2390-2400 yuan/ton.
• Southwest: Prices stable at 2300-2750 yuan/ton.

Factory Side:

Following price increases, the rate of new orders has slowed. Currently, supported by pending orders, prices remain firm. Some enterprises have reduced prices to attract orders. Although there are some transactions, the overall follow-up is generally weak, with enterprises maintaining mostly stable quotations with slight adjustments.

Market Side:

Prices have reached high levels, and downstream participants are in a wait-and-see mode. Most positive factors have been released, leading to a cooling of enthusiasm for higher prices and a marked slowdown in follow-up. The sentiment is cautious, with narrow adjustments and a relatively stagnant market.

Supply Side:

Some maintenance plans are still in place this week, maintaining a tight supply of market spot goods. Market supply remains limited.

Demand Side:

Downstream compound fertilizer factories continue to operate fairly well, maintaining just-in-time demand. However, the cautious attitude towards high prices persists, with a slowed pursuit of higher prices and a general wait-and-see stance. Demand support is relatively limited.

Overall:

The urea market is currently at high price levels, with a weak downstream willingness to continue buying at rising prices. The market remains in a state of consolidation with limited fluctuations. In the short term, urea prices are expected to gradually decline but remain limited due to tight supply conditions.