Urea Monthly Review: Supply Guarantee Policies Affect Market, Urea Prices Under Upward Pressure

Urea Market Analysis

The domestic urea spot market in November was characterized by a tug-of-war between manufacturers, with prices initially rising then falling, overall operating at high volatility. Factory prices were largely determined by individual production and inventory situations. Export difficulties led to substantial stockpiling at domestic ports and minimal enterprise inventories, resulting in a tight supply. Enterprises aimed to increase inventories, supported by supply guarantee policies, leading to price fluctuations.

In early November, reduced natural gas supply in Egypt led to some factory closures and a drop in urea production, thereby raising international urea prices. Supported by pending orders, domestic prices also rose. With robust market demand and factories receiving numerous orders, many chose to accumulate inventory and control new orders, thereby raising their factory prices. Futures market optimism further bolstered confidence, leading to a reluctant-to-sell attitude and high-priced market transactions. However, prices eventually fell from these highs.

Mid-month, the market's acceptance of high prices waned, slowing entry market purchases and challenging new order transactions. Most traders sold below spot prices, and factories were forced to reduce their prices, leading to a market price drop and increased downstream restocking. In the second half of the month, the Phosphorus Compound Fertilizer Industry Conference in Wuhan led to reduced market activity as many manufacturers attended. Factory quotes remained stable with limited new orders, and spot transactions weakened as the market awaited guidance from the conference. At month's end, policy influences and futures market news reduced the urgency of market purchases, and the downstream market adopted a watchful attitude.

Market Forecast:
Cost-wise, the supply-demand relationship of upstream synthetic ammonia was relaxed, with prices continuing to fall but remaining high, causing market resistance. This resistance could lead to a continued price decline. On the supply side, high levels persisted, but with natural gas limitations impacting gas-head devices, production might decrease, warranting close monitoring of device shutdown timings. Demand-wise, it is the off-season for agricultural needs, but market restocking is evident, with downstream expected to purchase in a timely and measured manner. Industrial demand from compound fertilizer enterprises is showing signs of increased urea consumption. Exports remain restricted, weakening domestic enterprise export willingness, with some planning departures from ports. Overall, the domestic urea market in December is expected to be stable with slight declines, facing upward pressure.

Domestic Urea Industry Operation Statistics

The average monthly operating rate in the domestic urea industry was 80.74%, a 0.69% decrease from the previous month but a 12.44% increase year-over-year. Short-term plant shutdowns were frequent, with minor changes in operating rates. With gas-head devices expected to shut down for maintenance next month, the capacity utilization rate is anticipated to continue falling.

Domestic Urea Production Trend

The domestic urea production was approximately 5.31 million tons, a 4.79% decrease month-over-month and a 16.12% increase year-over-year. Despite high operating rates, temporary shutdowns increased, and with Gansu Liu's gas-head device entering its winter natural gas restriction period, production slightly decreased compared to the previous month.

Domestic Urea Import-Export Data

Urea Export Data

According to customs data, in October 2023, China exported 561,600 tons of urea, a 60.05% increase year-over-year and a 52.69% decrease month-over-month, with an average export price of 369.28 USD/ton. From January to October 2023, the cumulative export total was 3.39 million tons, a 76.46% increase year-over-year.

Urea Import Data

In October 2023, China imported 23.74 tons of urea, a 98.63% decrease year-over-year and a 37.17% decrease month-over-month, with an average import price of 2643.85 USD/ton. From January to October 2023, the cumulative import total was 2204.88 tons, a 43.44% decrease year-over-year.

Domestic Urea Apparent Consumption Data

In October 2023, China's apparent urea consumption was 4.99 million tons, a 17.89% increase month-over-month and a 30.03% increase year-over-year. From January to October 2023, the cumulative apparent consumption was 47.09 million tons, a 3.80% increase year-over-year.

Domestic Urea Inventory Trend

Port Monthly Inventory Trend

As of November 24, domestic urea port monthly inventory was 319,000 tons, an increase from the previous month and year-over-year. Urea port inventories were higher than the previous month and above the same period last year.

Enterprise Monthly Inventory Trend

As of November 29, domestic urea enterprise monthly inventory was about 473,400 tons, an increase from the previous month but a decrease year-over-year. With exports restricted, enterprises aimed to accumulate inventory by controlling new orders.