Contents

1. Urea Market Overview
   1.1 FDD Price Index
   1.2 Delivery Region Quotations

2. Industry Chain Dynamics
   2.1 Daily Production
   2.2 Market Inventory
   2.3 Compound Fertilizer Industry
   2.4 Melamine Industry
   2.5 International Market Quotations

3. Market Outlook

01 Market Overview

1.1 FDD Price Index

This week, China’s domestic urea market generally showed a weak downward trend. The market lacked substantive bullish support, overall transaction performance was weak, and the price center continued to move lower. Fundamentals were suppressed by multiple bearish factors, with high supply, high inventories, and weak domestic demand becoming more prominent. Overall industry operating pressure was significant.

On the supply side, enterprise operating rates edged lower this week, but national daily output remained at a high level above 210,000 tonnes. Enterprise inventories continued to accumulate and grew more than expected during this cycle. The main reasons were restricted export port collection, a gap in agricultural demand, and slow industrial recovery. Weak domestic demand caused inventories to accumulate rapidly, while the market lacked effective short-term channels for digestion.

On the demand side, agricultural demand was released slowly and could not form effective support. Operating rates in industrial sectors such as compound fertilizer and panels remained low, rigid-demand procurement was limited, and overall demand support was weak. Although export policy has loosened somewhat, overall port collection remains slow, and the diversion effect of export cargoes has fallen short of expectations, providing only limited support to market sentiment.

Overall, the current urea market faces a prominent supply-demand contradiction: high operating rates, high daily output, and continued inventory accumulation coexist, while domestic demand support remains limited. The short-term loose supply-demand pattern is difficult to materially improve. The market lacks actual bullish support and is expected to continue weak and volatile operation in the short term. Going forward, attention should be paid to the pace of autumn fertilizer demand launch, enterprise inventory digestion, and changes in export policy.

According to FDD data, as of this Friday, the average domestic small-granule urea price index was 1,833.73, down 10.64 from last week, a decrease of 0.58% week-on-week.

In the first half of the week, the urea market moved within a narrow range. On the spot side, market sentiment was stable. Some local regions had scattered agricultural topdressing rigid demand providing support, downstream purchases were mostly need-based, overall transactions were stable to weak, and producer quotations generally remained firm with limited room for concessions.

On the futures side, rising Middle East geopolitical risks, the continuing U.S.-Iran conflict, and news around Strait blockages and paid navigation supported higher international trade costs. The rebound in international urea prices boosted domestic sentiment and export profit margins. At the same time, export policy signals again showed signs of support, stabilizing board sentiment and temporarily supporting the market. However, affected by weak fundamental expectations, the market was still volatile and under pressure overall, with futures slightly weaker than spot.

In the second half of the week, futures and spot markets weakened in tandem and moved lower in volatile trading. In the spot market, high operating rates continued on the supply side, market supply was abundant, enterprise inventories kept rising, shipment pressure increased, and producers made more concessions to promote shipments. On the demand side, the off-season effect became evident. Agricultural topdressing demand continued to weaken, rigid-demand support was insufficient, and operating rates in downstream industrial sectors such as compound fertilizer and melamine remained low. Raw material replenishment interest was weak, and only low-priced cargoes saw scattered transactions. After a slight rebound in prices, new orders quickly stalled, and transactions still failed to expand in volume.

Although export policy expectations were loose, actual port collection was slow and export diversion was limited, failing to provide effective bullish support. The futures market fully followed weakening spot fundamentals. Under pressure from high inventories, weak demand, and high supply, the board remained under pressure and moved lower in volatile trading. Bearish sentiment increased, and the synchronized weakness of futures and spot became clear. The market completely lacked rebound momentum, and the overall trend remained weak.

1.2 Delivery Region Quotations

Specifically, prices in Northeast China fell to RMB 1,860-1,880/tonne. Prices in East China fell to RMB 1,750-1,790/tonne. Prices for small- and medium-granule urea in Central China fell to RMB 1,750-1,900/tonne, while large-granule prices remained stable at RMB 1,780-1,810/tonne. Prices in North China fell to RMB 1,650-1,910/tonne. Prices in South China fell to RMB 1,820-1,900/tonne. Prices in Northwest China rose to RMB 1,860-1,950/tonne. Prices in Southwest China fell to RMB 1,680-2,080/tonne.

02 Industry Chain Dynamics

2.1 Daily Production

Output

This week, domestic urea output was around 1.5117 million tonnes, down 9,000 tonnes from last week, a decrease of 0.60% week-on-week and up 8.68% year-on-year. Daily output was 214,800 tonnes. During the week, industry daily output stayed above 210,000 tonnes, and supply continued to fluctuate at high levels, leaving the market supply side still ample. Average daily output for the week was 214,800 tonnes, down 1,300 tonnes from last week.

During the cycle, provinces with a week-on-week increase in output included Shanxi and Jiangsu, while provinces with a clear week-on-week decrease included Anhui, Yunnan, and Henan.

Operating Rate

The domestic urea industry operating rate was around 89.91%, down 0.54 percentage points week-on-week and up 5.45 percentage points year-on-year. The weekly operating rate declined but remained above the same period last year. During the cycle, provinces with rising operating rates included Gansu and Jiangsu, while provinces with declining operating rates included Anhui, Yunnan, Heilongjiang, and Henan.

By product type, large-granule urea output was around 283,300 tonnes, down 7,300 tonnes from last week, a decrease of 2.51% week-on-week, and up 8,900 tonnes from the same period last year, an increase of 3.24% year-on-year. The large-granule operating rate was around 81.78%, down 2.11 percentage points from last week and down 1.25 percentage points from the same period last year.

Small- and medium-granule urea output was around 1.2184 million tonnes, down 1,700 tonnes from last week, a decrease of 0.14% week-on-week, and up 124,100 tonnes from the same period last year, an increase of 11.34% year-on-year. The small- and medium-granule operating rate was around 92.04%, down 0.13 percentage points from last week and up 7.22 percentage points from the same period last year.

By process, coal-based urea output was around 1.2364 million tonnes, down 11,500 tonnes from last week and up 159,600 tonnes from the same period last year. The operating rate was around 94.10%, down 0.88 percentage points from last week and up 8.32 percentage points year-on-year.

Gas-based urea output was around 265,300 tonnes, up 2,500 tonnes from last week and down 26,600 tonnes from the same period last year. The operating rate was around 74.44%, up 0.70 percentage points from last week and down 2.06 percentage points year-on-year.

2.2 Market Inventory

Enterprise Inventory

This week, enterprise inventory was around 1.4089 million tonnes, up 173,100 tonnes from last week, an increase of 14.01% week-on-week, and up 390,400 tonnes from the same period last year, an increase of 38.33% year-on-year.

During this cycle, domestic urea producer inventories rose more than expected, and overall industry inventory pressure increased significantly. On the one hand, some enterprises’ export orders are still in the preparation and pending-shipment stage, occupying a certain proportion of warehouse capacity. On the other hand, terminal demand fundamentals remain weak, while extreme weather such as heavy rainfall in some regions disrupted logistics and shipments. Downstream users’ willingness to take delivery slowed noticeably, the concentration of cargoes at the production end intensified, and transmission of inventory from factories into circulation was blocked. This ultimately drove a sharp increase in enterprise inventory pressure.

Provinces where enterprise inventories increased included Anhui, Gansu, Hebei, Heilongjiang, Hubei, Jiangsu, Jiangxi, Inner Mongolia, Shanxi, Shaanxi, Sichuan, Xinjiang, Yunnan, and Chongqing. Provinces where enterprise inventories decreased included Henan, Hainan, Qinghai, and Shandong.

Port Inventory

Total port inventory was 179,900 tonnes, up 27,000 tonnes from last week, an increase of 17.66% week-on-week, and down 115,100 tonnes from the same period last year, a year-on-year decrease of 39.02%.

During this cycle, port inventories continued to accumulate. As some vessel schedules approached, port collection began to appear. In addition, weak domestic trade demand lifted market participants’ willingness to move cargoes to ports. Ports with increased inventory included Longkou Port, Tianjin Port, Zhenjiang Port, and Huanghua Port for small-granule cargoes. The port with decreased inventory was Yantai Port for large-granule cargoes. No clear changes were seen at other ports.

Large-Granule Urea

This week, domestic large-granule urea port inventory was 78,900 tonnes, down 25,000 tonnes from last week, a decrease of 24.06% week-on-week, and down 255,100 tonnes from the same period last year. Large-granule urea port volumes decreased slightly during the week and remained below the same period last year.

Small-Granule Urea

This week, domestic small-granule urea port inventory was 136,000 tonnes, up 60,000 tonnes from last week, an increase of 78.95% week-on-week, and down 19,000 tonnes from the same period last year. Small-granule urea port inventory increased during the week and remained below the same period last year.

2.3 Compound Fertilizer Industry

This week, China’s domestic compound fertilizer market generally maintained a stable-price stalemate and structurally divergent operating pattern, with no obvious price increases or declines. The overall market tone remained relatively steady. The market is currently in a transition window between the end of summer fertilizer demand and autumn fertilizer preparation. Terminal spot rigid-demand procurement is light, there is no concentrated replenishment boom, and overall trading pace is relatively slow.

As of this Friday, the domestic 45%S price index was 3,400.83, and the 45%CL price index was 2,898.18.

On the cost side, strong cost support remains. Sulfur prices continued to rise, while mainstream raw materials such as phosphate rock, ammonium phosphate, and synthetic ammonia generally operated steadily. Raw material cost fluctuations were limited, supporting firm quotations from compound fertilizer enterprises, while industry production margins continued to be compressed.

On the supply side, the compound fertilizer market operating rate this week was 33.41%, up 3.61 percentage points from last week. Industry operating rates rose slightly during the week. Overall operating rates remained low, and producers shifted their core business focus to autumn fertilizer pre-sale orders and production scheduling. Most manufacturers launched phased pre-sale preferential policies, and pre-sale orders followed up steadily. However, overall shipment pace remained slow, mainly based on need-based production scheduling and batch deliveries.

On the demand side, market sentiment remained cautious. Downstream distributors and retailers generally adopted light-inventory operations and hand-to-mouth sales models to avoid inventory accumulation risks. Large-scale stocking willingness was insufficient. At the same time, the supply structure showed clear differentiation. High-phosphorus formula cargoes were relatively tight in circulation, while low-priced cargoes were gradually cleared.

Overall, the compound fertilizer market is expected to continue a broadly stable pattern with minor local adjustments, and sharp price increases or declines are unlikely. Cost support remains, and raw material prices are not expected to decline significantly, which will continue to support the bottom of compound fertilizer prices and limit downside room. However, terminal demand has not yet started on a concentrated basis, channel caution toward stocking is unlikely to change quickly, and slow rigid-demand follow-up will also limit upside price movement.

2.4 Melamine Industry

This week, China’s domestic melamine market generally showed a low-level, weak, and narrow-range volatile pattern, with limited overall market fluctuations and a weak overall tone. The industry is currently in the traditional demand off-season. The market lacks positive drivers, overall trading sentiment is quiet, and prices have remained in weak consolidation without any clear rebound.

On the cost side, support continued to weaken. The core raw material, urea, loosened and moved lower, causing overall cost-side support to fade and sharply narrowing the market’s price-support space. Producers became more willing to offer concessions to promote shipments.

On the supply side, the melamine market operating rate this week was 58.50%, down 2.13 percentage points from last week. Overall supply remains relatively sufficient. Domestic producers maintained high operating levels, industry supply was ample, inventories at some producers gradually accumulated, and shipment pressure increased.

On the demand side, performance remained weak. Downstream sectors such as panels, coatings, and adhesives showed clear off-season characteristics. Terminal finished-product orders were weak, and downstream enterprises operated at low rates. Downstream procurement sentiment was extremely cautious, basically maintaining a hand-to-mouth rigid-demand model, with no concentrated replenishment or stocking activity. Market transactions were mostly scattered small orders, lacking sustained volume support.

Overall, the weak, low-level stalemate in the melamine market is unlikely to reverse quickly, and there is insufficient momentum for a major recovery. Cost-side stabilization or recovery has not yet appeared, and weak raw material trends will continue to suppress market prices. Although downside room has become relatively limited, clear signs of bottoming and stabilization have not yet emerged.

2.5 International Market Quotations

China: Bulk small-granule FOB prices were USD 380.01-392.01/tonne, with the high end up USD 2/tonne.Black Sea: Small-granule port FOB prices were USD 365.01-375.01/tonne, flat from last week.Baltic Sea: Small-granule port FOB prices were USD 360.01-385.01/tonne, with the high end up USD 5/tonne.Middle East: Small-granule port FOB prices were USD 385.01-425.01/tonne, up USD 20-40/tonne.Brazil: Small-granule CFR prices were USD 410.01-420.01/tonne, up USD 5-15/tonne.India: CFR prices were USD 444.91-449.31/tonne, flat from last week.

Iran: Large-granule port FOB prices were USD 346.01-350.01/tonne, up USD 4-6/tonne.Egypt (Europe): Large-granule port FOB prices were USD 490.01-527.01/tonne, up USD 75-79/tonne.Brazil: Large-granule CFR prices were USD 420.01-450.01/tonne, up USD 15-25/tonne.Southeast Asia: Large-granule port CFR prices were USD 420.01-435.01/tonne, with the low end down USD 5/tonne.China: Large-granule port FOB prices were USD 400.01-415.01/tonne, up USD 5-10/tonne.

03 Market Outlook

Supply: The high and loose supply pattern continues, with limited contraction. At this stage, domestic urea enterprises overall maintain high operating rates. There are few units under maintenance, while restarts and new capacity are being released in an orderly manner, leaving overall market supply very ample. Over the next three weeks, 1-2 enterprises are expected to undergo planned maintenance, while 7-8 enterprises are expected to restart production. In terms of supply trend, with few confirmed maintenance plans and earlier shutdowns restarting successively, daily output is expected to remain high after rising, and supply is expected to remain sufficient.

Inventory: Inventory accumulation pressure is prominent, and destocking is slow. Current industry factory inventories and port inventories are both accumulating steadily, and overall inventory levels are relatively high. Producer shipment pressure continues to increase. Affected by export orders falling short of expectations, port collection cannot effectively divert supply. Combined with insufficient domestic transaction follow-up, the overall destocking pace is slow. In the later market, under the dual constraints of high inventories and weak demand, enterprises may continue flexible concessionary shipment strategies to accelerate shipments and ease inventory pressure, further limiting market rebound space. Inventory pressure will become the core short-term suppressing factor.

Demand: The off-season effect continues, while rigid demand recovers slowly. Domestic agricultural fertilizer demand is currently in a seasonal gap period, with only scattered regional topdressing demand and no broad concentrated fertilizer-use support. Agricultural demand remains weak overall. On the industrial side, downstream sectors such as compound fertilizer and melamine continue to operate at low rates. Raw material procurement is mainly need-based and hand-to-mouth, with weak willingness for bulk replenishment. Demand is unlikely to improve clearly in the short term, with only limited marginal recovery room. Over time, autumn fertilizer preparation demand will gradually start, and downstream stocking sentiment is expected to warm slowly. This will provide some rigid-demand support to the market and gradually ease the weak demand pattern.