Urea Weekly: Demand Follow-up Lags, Market Transactions Focus on Lower End

Market Overview:

Feidoodoo Price Index:

This week, the urea market atmosphere was mediocre, with high-priced transactions being sluggish. Transactions are mainly maintained at the lower end, with prices slightly adjusting within a narrow range.

According to Feidoodoo Price Index data: As of this Friday, the domestic average price index for small granule urea was 2318.68, a decrease of 9.63 from last week, with a week-on-week decline of 0.41%.

At the beginning of the week, the market trading atmosphere cooled down, with few new orders being completed. The sales pressure on enterprises became evident, with a slight easing in quotations. Some manufacturers adjusted their quotations slightly downward to secure orders, with limited follow-up from downstream. At this time, the demand for urea was gradually being released as industrial needs were still recovering, albeit slowly, leading to a narrow downward adjustment in urea prices.

Mid-week, following the downward adjustment in factory quotations, the receipt of orders improved, and the transaction of low-end goods in the market significantly increased, strengthening the enterprises' mentality to hold prices. Coupled with the expectation of reduced supply and the continuous increase in the operation of downstream compound fertilizer factories, this formed a positive factor, leading to a rebound and upward adjustment in enterprise quotations, controlling the receipt of orders.

Towards the end of the week, the continuous upward movement of prices led to a gradual emergence of market resistance, with downstream purchases following cautiously as needed. The transaction atmosphere was somewhat average, with more observing than trading. Factories shipped out pre-received orders from earlier periods, and with the support of new orders, quotations mostly remained stable, with some manufacturers continuing to reduce prices to secure orders slightly.

Delivery Area Quotations:

Specifically, prices in the Northeast region rose to 2310-2380 yuan/ton. Prices in the North China region fell to 2120-2380 yuan/ton. Prices in the East China region fell to 2220-2290 yuan/ton. Prices in the South China region fell to 2370-2420 yuan/ton. Prices for medium and small granules in the Central China region fell to 2210-2380 yuan/ton, while prices for large granules fell to 2280-2400 yuan/ton. Prices in the Northwest region fell to 2260-2270 yuan/ton. Prices in the Southwest region remained stable at 2300-2600 yuan/ton.

Futures Warehouse Receipt Distribution:

As of this Friday, Zhengzhou Commodity Exchange urea futures had 0 receipts, a week-on-week decrease of 8014, mainly due to urea receipt cancellation days at the end of February.

Industry Chain Dynamics:

Daily Production:

Production: This week, domestic urea production was about 1.2799 million tons, a decrease of 3.74 from last week, with a week-on-week decline of 2.84% and a year-on-year increase of 8.89%. The daily production was 182,800 tons. This week, the industry's production continued to decline slightly, but overall it remained high. Some units will enter maintenance this month, and market supply may slightly decrease.

Operating Rate: The domestic urea industry's operating rate was about 84.44%, a week-on-week decline of 2.46% and a year-on-year increase of 4.12%. The domestic urea industry's operating rate slightly declined but remained higher than the same period last year.

Looking at different types, the production of large granule urea was about 241,500 tons, a decrease of 400 tons from last week, a week-on-week decline of 0.17%, an increase of 34,900 tons from the same period last year, and a year-on-year increase of 16.89%. The operating rate of large granules was about 83.97%, a week-on-week decline of 0.14%, and a year-on-year increase of 6.13%. The production of medium and small granule urea was about 1.0384 million tons, a decrease of 37,000 tons from last week, a week-on-week decline of 3.44%, an increase of 69,600 tons from the same period last year, and a year-on-year increase of 7.18%. The operating rate of medium and small granules was about 84.55%, a week-on-week decline of 3.01%, and a year-on-year increase of 3.68%.

Looking at different processes, the production of coal-based urea was about 976,700 tons, a decrease of 33,300 tons from last week, an increase of 55,000 tons from the same period last year. The operating rate was about 85.36%, a week-on-week decline of 2.91%, and a year-on-year increase of 0.94%. The production of gas-based urea was about 303,200 tons, a decrease of 4,100 tons from last week, an increase of 49,500 tons from the same period last year. The operating rate was about 81.59%, a week-on-week decline of 1.11%, and a year-on-year increase of 13.32%.

Market Inventory:

Enterprises: This week, enterprise inventory was about 748,800 tons, a decrease of 57,600 tons from last week, a week-on-week decline of 7.14%, a decrease of 80,100 tons from the same period last year, and a year-on-year decline of 9.66%.
Ports: Port inventory totaled 195,500 tons, an increase of 8,500 tons from last week, a week-on-week increase of 4.55%, an increase of 41,500 tons from the same period last year, and a year-on-year increase of 26.95%.
Large Granules: This week, domestic large granule urea port inventory was 120,000 tons, an increase of 8,000 tons from last week, a week-on-week increase of 7.14%, an increase of 72,000 tons from the same period last year. Large granule urea port inventory continued to rise slightly this week, still higher than the same period last year.
Small Granules: This week, domestic small granule urea port inventory was 75,500 tons, an increase of 500 tons from last week, a week-on-week increase of 0.67%, a decrease of 30,500 tons from the same period last year. Small granule urea port inventory continued to rise slightly this week but remained lower than in the same period last year.

Compound Fertilizer Industry:

This week, domestic compound fertilizer market prices continued to operate stably, with enterprises gradually shipping orders and the reduction of low-end goods in the market.

As of this Friday, the domestic 45%S price index was 2900.83; the 45%CL price index was 2575.45. On the enterprise side, enterprises mostly fulfilled previous orders, with quotations temporarily stable, and some transactions were made at lower prices to secure orders. On the market side, new order transactions were limited, with the focus on shipping goods and a wait-and-see trading atmosphere. On the supply side, the compound fertilizer market's operating rate this week was 35.97%, an increase of 3.19% from last week. This week's industry operating rate increased significantly, enterprises' shipments increased, finished product inventory declined, and daily production operated relatively stably, with the current market supply being loose. On the demand side, agricultural demand was affected by recent cold weather, delaying some fertilizer use, and agricultural purchase demand has not yet been released, we are waiting for further guidance. Overall, the current compound fertilizer market's shipments increased compared to last week, with demand still recovering. It is expected that the compound fertilizer market prices will remain largely stable with minor adjustments in the short term, and the market situation is expected to improve.

Melamine Industry:

This week, the melamine market fluctuated narrowly, with limited overall price adjustments and a stable market situation.

On the factory side, manufacturers continued to focus on fulfilling pending orders. With the consumption of previous orders, some manufacturers faced pressure to ship goods and wanted to secure new orders, with short-term stable prices being the main focus. On the market side, the overall trading atmosphere was average, with a strong wait-and-see sentiment and limited new order follow-up. On the supply side, the melamine industry's capacity utilization rate continued to operate at a high level this week, with a slight increase from last week to 71.93%. Some regions are expected to resume operations next week, which may increase industry supply pressure. On the demand side, downstream factories are gradually resuming work and production, with demand expected to recover gradually. Overall, the current melamine market supply continues at a high level, with the demand side still in the recovery process and not yet released. It is expected that next week's melamine market prices will continue to be largely stable with minor adjustments.

International Market Quotations:

Internationally, the bulk small granule Chinese FOB price was 333-342 USD/ton, with the lower end decreasing by 4 USD/ton; the Baltic FOB price was 290-310 USD/ton, with the lower end decreasing by 10 USD/ton.

The large granule Chinese FOB price was 348 USD/ton, an increase of 3 USD/ton; the Iranian large granule FOB price was 335-340 USD/ton, a decrease of 5-10 USD/ton.

Market Outlook:

Supply: Few planned shutdowns are expected next week, with daily production continuing at a high level and little change. Next week's market supply is expected to remain high.

Inventory: This week, transportation capacity recovered, market shipments increased, and inventory slightly declined. Next week's enterprise inventory is expected to continue decreasing.

Demand: Agricultural demand has slowed, and downstream restocking intentions are cautious; industrial demand is gradually being released, with a slow improvement, and significant positive demand factors have not yet appeared.