Urea Monthly: Weak Domestic Demand Keeps the Market in a Weak and Volatile Pattern (August 2026)

1. Urea Market Analysis

1.1 Urea Market Price Analysis

In August, the domestic urea market traded weakly and with volatility overall. Prices continued to probe lower in the first half of the month, then stabilized somewhat in the second half under cost and policy support. On the supply side, industry operating rates remained high. Maintenance at some plants and production switching by urea-methanol facilities led to temporary reductions in daily output, but total supply remained ample. On the inventory side, supply contraction in major producing regions and export orders eased local inventory pressure, but inventories continued to build in outlying regions and overall social inventory destocking remained limited.

On the demand side, demand remained weak. Agricultural demand was in a seasonal gap, compound fertilizer and melamine producers operated at low rates, and downstream buyers mainly replenished only for rigid demand at lower prices. Insufficient domestic demand follow-up remained the key factor weighing on the market. On the export side, the second batch of quotas and the conclusion of India's tender opened a channel to divert domestic supply. Accelerating deliveries to ports provided some support to the supply-demand balance. On the cost side, coal prices remained relatively firm, raising urea production costs. Fixed-bed producers have entered losses, gradually strengthening cost support at lower price levels. On the policy side, an early-August meeting of key industry producers released systemic support signals involving capacity discipline, orderly export liberalization and faster state-reserve purchases. These measures partly repaired bearish expectations, but market participants remained cautious and trading activity was limited. Overall, loose supply-demand fundamentals left the urea market without a clear directional driver. Prices mainly fluctuated in a narrow range, and attention should focus on the start of autumn fertilizer procurement and policy developments.

According to Feidoodoo data, as of August 31, 2026, the domestic small-granular urea price index was 1,758.18, down 0.77% year on year.

At the beginning of the month, the market continued the pessimism seen at the end of July, and prices weakened further. Supply remained high, daily output was ample, and market availability was sufficient. On the demand side, summer topdressing had largely concluded, autumn fertilizer procurement had not started, compound fertilizer operating rates remained low, and downstream buyers mainly purchased for rigid demand. Under the prominent supply-demand imbalance, prices in major regions repeatedly hit annual lows. Coal prices rose somewhat, but cost support was limited by weak demand.

In the middle of the month, the market entered a recovery window influenced by multiple factors. Concentrated maintenance in major producing regions reduced daily output from high levels. More importantly, policy support signals stated that prices had fallen below a reasonable range and provided favorable guidance on capacity discipline, orderly exports and faster state reserves. India's tender and the second batch of export quotas also boosted port accumulation and eased local inventory pressure. Together, costs and policies improved sentiment, allowing prices to stabilize and test modest increases in some regions.

By the end of the month, the market returned to a stalemate. Expectations of additional capacity and the gradual restart of previously maintained plants raised concerns about recovering supply. Demand did not improve materially, autumn fertilizer procurement started slowly, compound fertilizer operating rates rose only modestly, and downstream acceptance of higher prices remained weak. Export port accumulation continued, but total volumes and actual vessel departure schedules were uncertain, limiting lasting support. Spot prices consolidated narrowly at low levels, with upside constrained by demand and downside supported by costs and policy expectations.

2. Domestic Urea Industry Operating Statistics

According to Feidoodoo data, the average domestic urea industry operating rate was 85.44% this month, down 4.33 percentage points from last month and up 2.55 percentage points year on year. The average operating rate from January to August 2026 was approximately 88.56%, up 3.17 percentage points from 85.39% in the same period last year. More producers entered maintenance during the month, reducing industry output and capacity utilization. Although daily output declined, overall supply remained ample.

3. Domestic Urea Output Trend

According to Feidoodoo data, domestic urea output was approximately 6.32 million tonnes this month, down 4.82% month on month but up 6.60% year on year. Cumulative domestic urea output from January to August 2026 was 51.5442 million tonnes, up 4.3245 million tonnes, or 8.95%, from 47.3097 million tonnes in the same period last year. Maintenance increased during the month, lowering output and capacity utilization, but overall supply remained sufficient.

4. Domestic Urea Import and Export Data

4.1 Domestic Urea Export Data

According to customs data, China's urea exports in July 2026 totalled 403,200 tonnes, up 396,100 tonnes from the previous month, or 5,557.57%, but down 164,000 tonnes year on year, or 28.91%. The average export price was USD 448.54/tonne. Cumulative exports from January to December 2026 totalled 906,800 tonnes, up 262,300 tonnes year on year, or 40.70%.

4.2 Domestic Urea Import Data

According to customs data, China's urea imports in July 2025 totalled 35.42 tonnes, up 13.24 tonnes from the previous month, or 59.72%, but down 497.46 tonnes year on year, or 93.35%. The average import price was USD 2,452.68/tonne. Cumulative imports from January to December 2026 totalled 868.73 tonnes, down 954.61 tonnes year on year, or 52.36%.

5. Domestic Apparent Urea Consumption

According to Feidoodoo data, China's apparent urea consumption was 6.2366 million tonnes in July 2026, down 198,600 tonnes from June, or 3.09%, but up 761,400 tonnes year on year, or 13.91%. Cumulative apparent urea consumption from January to July 2026 was 44.3180 million tonnes, up 3.5799 million tonnes year on year, or 8.79%.

6. Domestic Urea Inventory Trends

6.1 Monthly Port Inventory Trend

According to Feidoodoo data, domestic urea port inventories were approximately 1.0766 million tonnes at the end of this month, up 919,700 tonnes from last month and up 583,600 tonnes year on year. Export conditions showed clear marginal improvement and became an important channel for easing phased domestic oversupply. The market is transitioning from export expectations to actual execution, and port accumulation has accelerated. Producers are actively shipping for export to reduce domestic supply pressure amid weak domestic consumption, while India's new import tender has supported external demand. Export shipments have therefore become an important channel for producers to offset weakening domestic demand and reduce elevated factory inventories.

6.2 Monthly Producer Inventory Trend

According to Feidoodoo data, domestic urea producer inventories were approximately 1.6710 million tonnes at the end of this month, up 52,400 tonnes from last month and up 713,600 tonnes year on year. Producer inventories continued to accumulate during the month and remained above the level recorded in the same period last year. The pace of inventory accumulation narrowed, but no clear destocking signal emerged. Concentrated maintenance reduced supply temporarily and more accommodative export policy diverted some domestic inventories, but weak downstream demand was insufficient to drive market-wide destocking.

7. Urea Market Outlook

On the supply side, the urea market will likely remain volatile amid a contest between weak current fundamentals and marginal positive factors. Plants will alternate between maintenance and restarts. Previously shut facilities will gradually resume production, and with the industry's high capacity base, temporary output reductions will not reverse the broad pattern of ample supply.

On the inventory side, export shipments and port accumulation will continue to divert cargoes from plants and may slow the pace of inventory accumulation. However, inventories accumulated earlier remain high. Exports mainly transfer inventory from factories to ports rather than creating broad, substantial destocking. Inventory pressure remains one of the core factors constraining spot-market upside.

On the demand side, a phased recovery is expected but incremental demand will be limited. Procurement of base fertilizer for northern autumn sowing will gradually begin, but grassroots distributors remain cautious, typically keeping low inventories and turning stock quickly. The scale of concentrated restocking remains uncertain. Compound fertilizer producers have high finished-product inventories and limited operating-rate flexibility, while wood-panel, melamine and denitrification sectors continue to purchase only as needed.

On the export side, exports are the most important source of flexibility. Earlier Indian tender orders are entering a period of concentrated loading and shipment, which will continue to absorb domestic supply. However, the pace of external-demand realization remains uncertain. Actual loading schedules, international prices and geopolitical developments may affect export execution. Exports are more likely to provide phased sentiment support than fully offset loose domestic fundamentals.

Overall, the urea market next month will remain influenced by intertwined bullish and bearish factors. Supply will remain broadly loose as maintained plants restart. Exports may slow inventory accumulation but will not materially eliminate high inventory pressure. Domestic demand has seasonal autumn fertilizer expectations, but downstream procurement remains cautious. The market lacks a one-way driver and prices are likely to fluctuate within a range. Attention should focus on downstream fertilizer procurement and the execution of export shipments.