Urea Monthly Review: Lackluster Market Trading, Factory Prices Continue to Decline

Urea Market Analysis

Urea Market Price Analysis:

In December, China's domestic urea spot market remained stagnant, with prices stabilizing and slightly declining. This month, factory prices were largely determined by individual order receipts and inventory accumulation. Continuous international export pessimism weakened the export enthusiasm of urea enterprises, leading to a focus on the domestic market and gradual domestic replenishment of orders. According to FERTOMANY data, as of December 27, 2023, the domestic urea small particle price index was 2409.82, a 13.20% decrease compared to the previous year.

Market transactions continued to be uneventful early in the month, with a slightly stagnant atmosphere. With expectations of reduced supply, downstream entities frequently replenished at lower prices, leading to better low-price transactions and a slightly warmer transaction atmosphere. Some factories, supported by pending orders, slightly raised their factory prices, but the downstream acceptance of higher prices was low, slowing down purchasing and intensifying the wait-and-see sentiment. Due to market conditions, the overall rise in urea prices was limited, and most enterprises maintained stable prices under the influence of the policy to ensure supply and stabilize prices, with an average pre-receipt period of around one week.

Mid-month, new order transactions continued to be average. Downstream purchasing was based on individual needs, with a continued wait-and-see mentality overall. In East China, due to the approaching time for winter storage downstream, the willingness to replenish increased, leading to better receipt of orders for some low-end quotations from major factories, slightly driving market prices. Enterprises continued to be influenced by expectations of reduced production, maintaining their willingness to accumulate inventory and control orders. However, under policy influence, prices faced upward pressure.

Snow and rain affected domestic transportation at the end of the month, obstructing goods shipment and increasing enterprise inventory. The downstream sentiment was affected, and traders continued their wait-and-see approach. With gashead enterprises slowly realizing maintenance and low-priced goods impacting the market, enterprises lacked confidence in raising prices, further delaying downstream purchasing. Market transactions were mostly based on just-in-time needs, and enterprises gradually slightly reduced their prices to receive orders based on their pending orders and production situations.

Domestic Urea Industry Operation Statistics:

According to Feidoodoo data, this month's average operation rate for the domestic urea industry was 79.27%, a 1.47% decrease from the previous month and a 13.54% increase compared to the same period last year. The average operation rate for January to December 2023 was approximately 78.90%, an increase of 9.47% compared to the same period last year's 69.42%. The monthly operation rate slightly declined but remained higher than the same period last year. This month saw more short-term plant shutdowns and gradual production decreases, with end-of-month market supply reaching a low point. Next month's capacity utilization rate is expected to continue running at a low level.

Domestic Urea Production Trend:

According to Feidoodoo data, this month's domestic urea production was approximately 518.91 million tons, a 2.64% decrease month-on-month and a 15.06% increase year-on-year. From January to December 2023, the total domestic urea production accumulated to 6107.63 million tons, an increase of 469.39 million tons compared to last year's 5638.24 million tons, a rise of 8.33%. This month's production slightly decreased compared to last month, influenced by gas-head enterprises gradually undergoing maintenance in the second half of the month and the sluggish market atmosphere, leading to temporary shutdowns and reduced daily production.

Domestic Urea Import and Export Data

Domestic Urea Export Data:

According to customs data, in November 2023, China exported 515,500 tons of urea, an increase of 142,900 tons (38.36%) compared to the same period last year and a decrease of 46,100 tons (8.21%) compared to the previous month. The export price for the month was $372.25/ton. From January to November 2023, the total export volume accumulated to 3,911,100 tons, an increase of 1,614,200 tons (70.28%) compared to last year.

Domestic Urea Import Data:

According to customs data, in November 2023, China imported 20.84 tons of urea, a decrease of 147.48 tons (87.62%) compared to the same period last year and a decrease of 2.91 tons (12.25%) compared to the previous month. The import price for the month was $4467.82/ton. From January to November 2023, the total import volume accumulated to 2,225.72 tons, a decrease of 1,840.79 tons (45.27%) compared to last year.

Domestic Urea Apparent Consumption Data:

According to Feidoodoo data, in November 2023, China's apparent urea consumption was 502.28 million tons, a decrease of 18.46 million tons (4.39%) compared to October and an increase of 82.09 million tons (19.54%) compared to the same period last year. From January to November 2023, the total apparent consumption accumulated to 5,280.18 million tons, an increase of 323.23 million tons (6.52%) compared to last year.

Domestic Urea Inventory Trend

Monthly Port Inventory Trend:

According to Feidoodoo data, as of December 22, the domestic urea port monthly inventory was 189,000 tons, a decrease of 130,000 tons compared to the previous month and an increase of 6,000 tons compared to the same period last year. Urea port inventory decreased compared to last month but remained higher than the same period last year. This month's exports continued to be limited, with international prices lower than domestic market prices, leading to poor export conditions for domestic goods. Enterprises focused more on the domestic market, with port goods gradually leaving.

Monthly Enterprise Inventory Trend:

According to Feidoodoo data, as of December 27, the domestic urea enterprise monthly inventory was approximately 639,900 tons, an increase of 166,500 tons compared to the previous month and a decrease of 275,100 tons compared to the same period last year. This month's urea enterprise inventory increased but remained lower than the same period last year. With continued export restrictions, weak market purchasing, and low replenishment willingness, enterprise inventory accumulation increased.

Urea Market Forecast:

Cost Aspect: The supply-demand atmosphere for upstream synthetic ammonia is average, with market prices fluctuating and regional differences. The overall ammonia market supply continues to be abundant, but downstream demand remains weak. In some regions, goods move better, with prices stable and slightly increasing, and enterprises flexibly adjust shipments according to their situations.

Supply Aspect: This month's supply was affected by natural gas plant gas restrictions, with gas-head plants gradually shutting down and production showing a declining trend. Next month, with the continued maintenance of gas-head plants, supply may continue to decline slightly.

Demand Aspect: The current agricultural market's winter storage progress is slow, with terminal demand not yet fully released. The market has shown signs of starting to restock recently, and it is expected that downstream will continue to purchase timely and in necessary quantities. Industrial demand for compound fertilizer enterprises is gradually increasing, continuing to ship previous orders with slow new order follow-up, and urea demand remains average, primarily based on necessity.

Export Aspect: Export restrictions continue, with current international prices lower than domestic market prices, weakening domestic enterprises' export willingness. Additionally, under the influence of supply guarantee policies, enterprises focus more on domestic market supply, with exports currently bearish.

Overall, it is expected that in January 2024, China's domestic urea market will continue to be stagnant, with prices stable but slightly declining and facing upward pressure.