Urea Weekly: Favorable Market Supply and Demand Atmosphere, Continuous Inventory Reduction by Enterprises

Market Overview

Fertoduo Price Index

This week, the urea market has shown continuous improvement, with prices consistently rising. Enterprises, supported by reduced inventories and pending orders, have maintained a positive outlook, with prices being consistently adjusted upwards.

According to Fertoduo data estimates, as of this Friday, the average price index for domestic small granular urea is 2371.65, an increase of 65.61 from last week, representing a 2.85% week-on-week rise.

This week saw a large number of pre-ordered items from manufacturers being gradually fulfilled, with strong price adjustments. Additionally, numerous maintenance activities took place this month, with many companies likely already halted operations. Short-term industry operations have shown a downward trend, with daily production continuing at low levels. With the agricultural demand just following up and industrial downstream compound fertilizer factories operating at high levels, the overall demand situation is favorable. New orders are being followed up well, and enterprises are continuously reducing inventories with smooth sales and no pressure. Market negotiation focus has shifted upwards accordingly, with enterprises mostly aiming to maintain price strength, continuously probing higher quotes.

Regional Price Quotations

• Northeast: Prices rose to 2300-2380 yuan/ton.
• East China: Prices increased to 2360-2400 yuan/ton.
• Central China: Small granular prices rose to 2340-2450 yuan/ton, and large granular prices increased to 2300-2380 yuan/ton.
• North China: Prices rose to 2240-2400 yuan/ton.
• South China: Prices increased to 2440-2490 yuan/ton.
• Northwest: Prices rose to 2390-2400 yuan/ton.
• Southwest: Prices increased to 2300-2750 yuan/ton.

Futures Warehouse Receipts

As of this Thursday, the Zhengzhou Commodity Exchange had 3034 urea futures contracts, an increase of 1014 contracts from last week.

Industry Chain Dynamics

Daily Production Situation

• Production: This week, domestic urea production was about 1.2313 million tons, a decrease of 65,000 tons from last week, a 5.01% week-on-week decline, but a 4.93% year-on-year increase. Daily production was 175,900 tons, continuing its downward trend as many units entered maintenance status, reducing industry production and tightening market spot supply.
• Operating Rate: The domestic urea industry operating rate was approximately 81.23%, a 4.29% week-on-week decrease, but a 1.05% year-on-year increase. The operating rate continues to be higher than the same period last year.

By Granule Type:

• Large Granular Urea: Production was about 242,600 tons, a 4,000-ton decrease from last week, a 1.62% week-on-week decline, but a 10.68% year-on-year increase. The operating rate was about 84.35%, a 1.39% week-on-week decrease, but a 1.76% year-on-year increase.
• Small and Medium Granular Urea: Production was about 988,700 tons, a 61,000-ton decrease from last week, a 5.81% week-on-week decline, but a 3.62% year-on-year increase. The operating rate was about 80.50%, a 4.97% week-on-week decrease, but a 0.85% year-on-year increase.

By Production Method:

• Coal-based Urea: Production was about 922,800 tons, a 75,400-ton decrease from last week, but a 44,000-ton increase from the same period last year. The operating rate was about 80.65%, a 6.59% week-on-week decrease, but a 0.16% year-on-year increase.
• Gas-based Urea: Production was about 308,500 tons, a 10,400-ton increase from last week, and a 13,900-ton increase from the same period last year. The operating rate was about 83.02%, a 2.80% week-on-week increase, and a 3.74% year-on-year increase.

Market Inventory:

Enterprises: This week, enterprise inventory was about 376,800 tons, a 126,000-ton decrease from last week, a 25.06% week-on-week decline, and a 62.89% year-on-year decrease.

Ports: Port inventory was 192,000 tons, a 3,000-ton decrease from last week, a 1.54% week-on-week decline, but a 112,000-ton increase from the same period last year, a 140.00% year-on-year increase.

Granule Types:

• Large Granular: This week, domestic large granular urea port inventory was 121,000 tons, a 3,000-ton decrease from last week, a 2.42% week-on-week decline, but a 92,000-ton increase from the same period last year.
• Small Granular: This week, domestic small granular urea port inventory was 71,000 tons, unchanged from last week, but a 20,000-ton increase from the same period last year.

Compound Fertilizer Industry

This week, the domestic compound fertilizer market saw prices remain stable with slight adjustments, mainly digesting previous orders with a few new orders following up slowly. As of this Friday, the domestic 45% S price index was 2818.33, and the 45% CL price index was 2387.27.

Enterprise Side: New orders followed up slowly, with enterprises mainly fulfilling pending orders. Some offers were raised, with the market temporarily remaining firm.
Market Size: Market stocking time was shortened, with supplies quickly moving downwards and low-end supplies decreasing, pushing transaction focus upwards.
Supply Side: This week, the compound fertilizer market operating rate was 49.60%, a 2.88% decrease from last week. The domestic compound fertilizer industry's capacity utilization rate fell from high levels, and enterprise finished product inventory decreased, supporting higher prices.
Demand Side: Limited summer fertilizer replenishment led to cautious downstream follow-up after price increases, currently remaining stable and observing.

Overall, compound fertilizer enterprises are expected to continue executing pending orders next week with strong price maintenance intentions. With demand gaps still existing and order follow-up, compound fertilizer market prices are expected to continue slight range adjustments next week.

Melamine Industry

This week, the melamine market showed stable fluctuations with limited price changes.

Factory Side: Manufacturers faced poor order intake, with slightly reduced offers, but with high-cost support, enterprises' price maintenance willingness increased, limiting price reductions.
Market Side: The domestic market, supported by export orders, remained stable, with cautious sentiment among market participants.
Supply Side: The industry capacity utilization rate slightly decreased compared to the previous period, with reduced supply, having minimal impact on the market.
Demand Side: Domestic demand remained sluggish with just-in-time procurement, limited purchasing quantities, and insufficient market support.

Overall, the melamine market supply and demand situation remains relatively loose, with the market temporarily supported by high costs, and prices are expected to remain stable with slight declines next week.

International Market Prices

In the international market, bulk small granular China's FOB price was 325-330 USD/ton, an increase of 2-9 USD/ton; Baltic FOB price was 250-270 USD/ton, an increase of 5 USD/ton.

Large granular China's FOB price was 325-330 USD/ton, an increase of 2-9 USD/ton; Iran's large granular FOB price was 250-252 USD/ton, a decrease of 5-6 USD/ton from last week.

Market Outlook

Supply: Many units are under maintenance, with daily production continuing to decline.

Inventory: Good enterprise shipments, with significant inventory reductions. Pending orders remain, and next week may continue inventory reduction, though the extent may narrow.

Demand: High prices have cooled downstream procurement willingness, with factory operations declining by the week's end. Next week's demand follow-up is expected to slow down.