Urea Weekly: Overall Significant Price Reduction by Companies, Slight Improvement in Market Orders

Market Overview:

Feiduoduo Price Index:
This week, the urea market saw a significant overall price drop, continuing a weak market sentiment. According to Feiduoduo data, as of this Friday, the average price index of domestic small particle urea was 2415.77, a decrease of 71.28 from last week, down by 2.87%.

At the beginning of the week, factories had some pending orders for support, but as these gradually decreased, several major regional companies reduced their prices significantly to attract orders. Despite this, overall demand remained relatively limited, and the actual buying enthusiasm of the downstream market did not see a significant increase, maintaining a cautious outlook.

Mid-week, the market continued to be sluggish, with limited transactions in the spot market and a bearish trend in the futures market. Even though the supply reached a low point, it did not create a favorable condition for downstream demand. As a result, winter storage demand was postponed, and compound fertilizer companies experienced slow sales, leading to a flat market transaction atmosphere.

Towards the end of the week, after several days of price reductions, new orders began to increase. However, due to the low volume of pre-holiday orders, companies faced increasing pressure to secure orders before the holidays. The market's transaction focus continued to decline, with low-end prices appearing frequently, leading to sporadic replenishment orders from the market but also intensifying the downstream's wait-and-see attitude.

Urea Delivery Area Prices:
Specifically, prices in the Northeast region dropped to 2350-2440 yuan/ton. In the North China region, prices fell to 2170-2420 yuan/ton. In the Northwest region, prices decreased to 2320-2330 yuan/ton. In the Southwest region, prices fell to 2350-2800 yuan/ton. In the East China region, prices dropped to 2270-2350 yuan/ton. In the Central China region, prices for small and medium particles fell to 2290-2550 yuan/ton, while large particles dropped to 2410-2460 yuan/ton. In the South China region, prices fell to 2450-2520 yuan/ton.

Futures Warehouse Receipt Distribution:
As of this Thursday, there were 10,255 urea futures receipts at the Zhengzhou Commodity Exchange, an increase of 177 from last week.

Industrial Chain Dynamics:

Daily Production:
This week, domestic urea production was about 1.094 million tons, a decrease of 6.66 from last week, down by 5.74%, and up by 7.65% year-on-year. The daily production was 156,300 tons, a decrease within the week, but still higher than the same period in 2022.

Operating Rate:
The operating rate of the domestic urea industry was about 70.95%, down by 4.32% from the previous week and up by 5.92% year-on-year. Although the operating rate decreased, it remained higher than the same period last year. This week, all gas head enterprise units with maintenance plans have completed their maintenance, and the industry's operating rate has reached a low point, with market supply continuing to be weak.

Looking at different types, the production of large particle urea was about 207,200 tons, down by 5,000 tons from last week, a decrease of 2.36% but an increase of 19,600 tons year-on-year, up by 73.13%. The operating rate for large particles was about 71.42%, down by 1.73% from last week but up by 0.73% year-on-year. The production of small and medium particle urea was about 886,800 tons, down by 61,600 tons from last week, a decrease of 6.50% but an increase of 58,100 tons year-on-year, up by 7.01%. The operating rate for small and medium particles was about 70.84%, down by 4.92% from last week but up by 6.96% year-on-year.

Looking at the production process, the production of coal-based urea was about 971,700 tons, up by 11,800 tons from last week and up by 107,900 tons year-on-year. The operating rate for coal-based urea was about 83.03%, up by 1.01% from last week and up by 8.33% year-on-year. The production of gas-based urea was about 122,300 tons, down by 78,400 tons from last week and down by 30,200 tons year-on-year. The operating rate for gas-based urea was about 32.91%, down by 21.10% from last week and down by 4.61% year-on-year.

Market Inventory:

Companies: This week, company inventory was about 639,900 tons, up by 61,900 tons from last week, an increase of 10.71%, but down by 275,100 tons year-on-year, a decrease of 30.07%.

Ports: Total port inventory was 183,000 tons, down by 6,000 tons from last week, a decrease of 3.17%, but up by 52,000 tons year-on-year, an increase of 39.69%.
Large Particles: This week, domestic large particle urea port inventory was 100,000 tons, down by 7,000 tons from last week, a decrease of 6.54%, but up by 68,000 tons year-on-year, continuing to be higher than the same period last year.
Small Particles: This week, domestic small particle urea port inventory was 83,000 tons, up by 1,000 tons from last week, an increase of 1.22%, but down by 68,000 tons year-on-year, still lower than the same period last year.

Compound Fertilizer Industry:

This week, the domestic compound fertilizer market lacked sufficient sentiment support, with prices continuing to adjust steadily downwards. As of this Friday, domestic 45%S prices were 3032.50; 45%CL prices were 2660.00. From the company perspective, most companies' quotes remained stable, with some companies offering specific discounts to downstream customers for orders, with actual transactions continuing to be negotiated on a case-by-case basis. From the market perspective, the market atmosphere remained low, with slow sales and flat market transactions. From the supply side, the compound fertilizer market's operating rate this week was 38.42%, down by 3.75% from last week, continuing to decline with poor market sales and reduced production at company facilities. From the demand side, winter storage fertilizer continued to progress slowly, with a cautious outlook. Overall, the current compound fertilizer market's capacity utilization rate is declining, although the downstream is following slowly, the overall progress is still ongoing, and it is expected that compound fertilizer market prices will continue to stabilize with slight decreases in the short term.

Melamine Industry:

This week, the melamine market operated firmly, with stable and slight price increases. From the company perspective, companies had sufficient pending orders, focusing mainly on handling previous orders, with a good mentality firm prices, and orderly market shipments. From the market perspective, after a round of price increases, the current market situation has slowed slightly, with an overall good market atmosphere. From the supply side, due to recent environmental inspections and gas head unit gas restrictions, many industry units have stopped, leading to a decline in domestic capacity utilization and tight supply in some areas. From the demand side, downstream manufacturers have focused on stockpiling towards the end of the year, leading to an increase in demand. Overall, with the company's pending orders supporting the market, the market atmosphere is good, and it is expected that the melamine market prices will continue to stabilize with slight fluctuations next week.

International Market Prices:

Internationally, bulk small particle Chinese FOB prices were 350-355 USD/ton, stable from last week; Baltic Sea FOB prices were 240-260 USD/ton, stable from last week.

Large particle Chinese FOB prices were 360-370 USD/ton, stable from last week; Iranian large particle FOB prices were 280-290 USD/ton, stable from last week.

Future Outlook:

Supply: All previously planned maintenance units have stopped, and there are currently no companies with maintenance plans for next week. It is expected that daily production changes will not be significant, but some company units have temporarily stopped due to cold weather causing malfunctions.

Inventory: This week, company inventory continued to accumulate slightly, with decreasing pending orders and low downstream stockpiling sentiment. It is expected that inventory will continue to adjust next week.

Demand: After a round of significant price reductions, downstream replenishment orders have begun to appear. It is expected that as prices adjust, downstream replenishment willingness will increase.