Urea Monthly: Market Boosted by News, Prices Stabilize Then Edge Higher

Urea Market Analysis

In April, the domestic urea market first stabilized, then, influenced by export news mid-month, prices were progressively pushed higher until the positive export news was fully digested by month's end, leading to another period of price stabilization.

According to FertilePlus data, as of April 28, 2024, the domestic small particle urea price index was 2250.14, a year-on-year decrease of 7.87%.

In the first half of the month, market prices were low and stable. Sales continued with limited follow-up under a general atmosphere, with manufacturers gradually reducing pending shipments and prices continuously dropping to lower levels under the pressure of fulfilling orders. However, new transactions did not improve, and enterprises faced pressure to ship goods. Additionally, with industry operations continuing at high levels and supply remaining ample against weak market demand follow-up, prices further declined, and the cautious sentiment among traders persisted, leading to weak and stable market conditions with prices consolidating at lower levels.

In the latter half of the month, loosening export policies began to improve the pessimistic sentiment among traders, and export news boosted market morale. This bullish atmosphere pushed prices upward, and the market began to rebound from its previous declines. Increased purchasing activity saw many enterprises accumulating ample pre-orders, raising their pending orders while running low on inventory. Moreover, an increase in operational failures and maintenance across plants led to a downtrend in daily production. The agricultural sector, particularly in rice-growing areas, took advantage of lower prices to stock up on fertilizers, leading to multiple positive factors stacking up, pushing industry quotations higher, and improving market conditions.

Domestic Urea Industry Operation Statistics

According to FertilePlus data, this month the domestic urea industry's average operational rate was 84.68%, a slight increase of 0.21% from the previous month and 2.55% higher year-on-year; from January to April 2024, the average operational rate was approximately 81.85%, up 4.54% from the previous year's 77.32%. Despite some facilities undergoing maintenance mid-month, which led to a slight decrease in operational rates, most resumed production by the end of the month, minimizing the overall impact on industry operations.

Domestic Urea Production Trends

For the month, domestic urea production was approximately 5.6906 million tons, a month-on-month increase of 0.18% and a year-on-year increase of 9.92%; from January to April 2024, total production was 21.7994 million tons, up 236.89 million tons or 12.19% from the previous year. Short-term maintenance was prevalent, but high operational rates continued, with daily production remaining relatively unchanged from the previous month.

Domestic Urea Export and Import Data

According to customs data, in March 2024, China exported 420 tons of urea, a decrease of 11.55 tons or 96.48% year-on-year, and a decrease of 330 tons or 44.07% month-on-month; the average export price for the month was $278.92 per ton. From January to March 2024, total exports amounted to 2,570 tons, down 501,200 tons or 95.13% year-on-year.

In March 2024, China imported 375.23 tons of urea, an increase of 366.57 tons or 4232.96% year-on-year, and an increase of 354.07 tons or 1672.65% month-on-month; the average import price for the month was $1096.07 per ton. From January to March 2024, total imports amounted to 3,676.52 tons, an increase of 1,640.63 tons or 80.59% year-on-year.

Urea Market Forecast

Cost-wise, upstream synthetic ammonia market prices initially rose then fell this month, with a significant north-south divide in trading sentiment, and the market adjusting in a weaker direction. Early in the month, the southern market had ample supply, in contrast to the tight supplies in the north, which supported higher quotations. However, as low-priced supplies from the south entered the northern market, this restricted price increases in the north, gradually narrowing the domestic price differential and causing transaction focal points to trend downward, forcing enterprises to lower their quotations. With the traditional off-peak season affecting market operations, it is expected that the synthetic ammonia market will continue to weaken next month, with prices stabilizing amid fluctuations.

Supply-wise, market supply remained high this month, with several facilities scheduled for maintenance next month, likely leading to reduced industry supply.

Demand-wise, market sentiment influenced downstream purchasing attitudes this month, with cautious follow-up steps. At the end of the month, fertilizer use in agricultural rice-growing areas began, with steady follow-up purchases; the industrial compound fertilizer market saw improved transactions, and factory operations stabilized, with ongoing procurement of raw materials supporting stable demand operations.

In terms of exports, although export policies were relaxed this month, the drop in international prices meant that domestic enterprises were not eager to export, and significant overseas shipments were challenging.

Overall, it is expected that in May 2024, domestic urea market demand will remain subdued with only essential follow-up, and with supply expected to decrease. Additionally, as international prices continue to fall, it is challenging to export domestic goods, so it is anticipated that the urea market will operate stably next month, with prices adjusting according to market demand.