Urea Monthly Review: Market Sentiment Remains Cautious, Prices Continue to Explore Lows

Urea Market Analysis:

Urea market price analysis:

In January, the domestic urea spot market operated weakly, with prices continuing to decline. The month saw a gradual reduction in pending shipments from enterprises, affected by the resumption of previously shut-down facilities in mid-month. Downstream entry into the market was cautious, compounded by enterprises aiming to secure sufficient orders before the Spring Festival, leading to continuous price reductions, yet the market transaction atmosphere remained tepid.

According to Feiduoduo data calculations: As of January 30, 2024, the domestic small granule urea price index stood at 2259.77, a 19.66% decrease year-on-year.

At the beginning of the month, as production restrictions ended, market demand began to emerge, overall transactions slightly rebounded, order volumes increased, and companies with better order intake slightly raised their quotations, and began controlling order acceptance, coupled with the industry still operating at low supply levels, and no expectations for a short-term increase in production, there was some bullish support on the supply side, leading to an upward price trend. Enterprises began to stabilize their quotations under the condition of better transactions at the market's lower end, executed pre-received orders, and had a positive shipment atmosphere, maintaining low daily production amid fluctuating market demand, with purchases made at lower prices as opportunities arose.

Mid-month, factories had many pending orders, and inventories gradually decreased. To accept new orders, some factories slightly reduced their prices while maintaining a relatively strong willingness to uphold prices. However, market resistance was strong due to high prices, agricultural demand was in the off-season, downstream factory operations declined, stockpiling was cautious, new order transactions slowed, and the market operated in a tepid atmosphere. Additionally, the impact of export limitations on domestic enterprises contributed to a lower domestic participation willingness, having a minor effect on market prices, leading to a trend of stability with slight declines.

By the end of the month, previously shut-down facilities gradually resumed, and industry supply incrementally increased, but the market atmosphere for moving goods remained low, enterprises gradually accumulated inventory, faced difficulties in shipments, inventory pressures increased, and most enterprises continued to lower their quotations to secure sufficient orders before the Spring Festival, with some starting to implement low-price order acceptance policies for downstream customers. Meanwhile, downstream agricultural demand continued with just-in-time stockpiling, industrial compound fertilizer factories operated at low levels, decreasing the enthusiasm for raw material purchases, demand follow-up was relatively limited, maintaining a cautious wait-and-see attitude, entering the market to purchase at lower prices, leading to continuous price exploration.

Domestic Urea Industry Operation Statistics:

According to Feidoodoo data statistics: This month, the domestic urea industry's average monthly operation rate was 74.05%, a 5.22% decrease from the previous month, and a 2.78% increase year-on-year. The domestic urea industry's monthly operation rate slightly declined but remained higher than the same period last year. This month, enterprise operation rates first decreased then increased, with many gas-based facilities affected by natural gas restrictions entering maintenance in the first half of the month, along with short-term failures in some facilities, leading to low industry operation rates; in the latter half of the month, as maintenance facilities gradually resumed, industry operations recovered, and with more maintenance facilities expected to resume next month, the capacity utilization rate is anticipated to rise.

Domestic Urea Production Trend:

According to Feidoodoo data statistics: This month, the domestic urea monthly production was approximately 5.0897 million tons, a 1.92% decrease month-on-month, and a 10.20% increase year-on-year. Early in the month, previously shut-down enterprises gradually resumed production, especially gas-based enterprises, coupled with few planned maintenance enterprises, leading to an overall upward trend in daily production, revealing industry supply pressure.

Domestic Urea Import and Export Data:

Domestic urea export data:

According to customs data: In December 2023, China's urea export volume was 343,600 tons, a 19.07 decrease year-on-year, a 35.70% decrease; a 17.19 decrease from the previous month, a 33.35% decrease; the export average price for the month was 367.97 USD/ton. From January to December 2023, the cumulative export volume totaled 4.2547 million tons, a 1.4235 million ton increase from the same period last year, a 50.28% increase.

Domestic urea import data:

According to customs data: In December 2023, China's urea import volume was 1,367.22 tons, a 634.59 increase year-on-year, an 86.62% increase; a 1,346.38 increase from the previous month, a 6,462.12% increase; the import average price for the month was 585.85 USD/ton. From January to December 2023, the cumulative import volume was 3,592.93 tons, a 1,206.20 ton decrease from last year, a 25.13% decrease.

Domestic Urea Apparent Consumption Data:

According to Feidoodoo data statistics: In December 2023, China's urea apparent consumption was 4.8469 million tons, a 32,500-ton increase from November, a 0.82% increase; an 870,500 ton increase from the same period last year, a 21.89% increase. From January to December 2023, China's cumulative urea apparent consumption was 56.825 million tons, a 3.2791 million ton increase from last year, a 6.12% increase.

Domestic Urea Inventory Trend:

Port monthly inventory trend:

According to Feidoodoo data statistics: As of January 26, the domestic urea port monthly inventory was 168,500 tons, a 20,500-ton decrease from the previous month, a 12,500-ton decrease year-on-year. Urea port inventory decreased from the previous month and was lower than the same period last year. This month, export limitations persisted, domestic enterprises continued to focus on the domestic market, some port goods shifted to domestic trade, and port inventory operated at low levels.

Enterprise monthly inventory trend:

According to Feidoodoo data statistics: As of January 26, the domestic urea enterprise monthly inventory was approximately 584,000 tons, a 55,900-ton decrease from the previous month, a 358,300-ton decrease year-on-year. This month, urea enterprise inventory decreased, continuing to be lower than the same period last year. Temporary shutdowns due to facility failures in some regions, factories continuing to ship previous orders, significant inventory declines in enterprises, and as maintenance facilities resume, coupled with limited market transactions, some urea enterprises began to accumulate inventory.

Urea Market Future Forecast:

Cost-wise, the upstream synthetic ammonia market operated weakly, with most factories actively shipping to reduce inventory before the Spring Festival, adjusting factory prices based on their own shipment and inventory situations, but with no new favorable demand, coupled with international price declines, the market transaction atmosphere appeared pessimistic, prices remained mostly stable with slight adjustments, operating weakly with fluctuations.

Supply-wise, supply was reduced in the first half of the month due to natural gas facility restrictions, with gas-based facilities entering maintenance, reducing market supply; starting mid-month, as maintenance facilities gradually resumed, supply increased, with an expected continuation of supply increments next month.

Demand-wise, current agricultural restocking slowed, purchases made based on market prices in stages, overall maintaining a heavy wait-and-see sentiment; industrial demand showed a declining trend, rigid demand weakened, downstream mainly fulfilled previous orders, with limited follow-up on new orders, compounded by continuously poor shipments dragging down, temporary shutdowns for maintenance in some enterprises, industry operation loads declined, reducing the enthusiasm for raw material purchases.

Export-wise, export limitations persisted, and domestic enterprises continued to focus on domestic market supply, with exports continuing to face bearish factors.

Overall, it is expected that in February 2024, the domestic urea market will continue to operate in a standoff, with prices mostly stable with slight declines, and operating weakly with fluctuations.