Urea Weekly: Procurement Influenced by Supply and News, Price Fluctuates

Market Overview

Feidoodoo Index:
This week, the urea market experienced an initial decline followed by a rise. Overall, the fluctuations were minor, maintaining a slight oscillation. As of this Friday, the domestic price index for small particle urea averaged 2523.29 yuan, a 0.12% decrease week-on-week.

Early Week:
The market was lackluster. Factories slightly reduced their factory prices supported by some pending shipments. However, the downstream market showed little enthusiasm for higher prices, leading to weak transactions and a stalemate in market operations. Under the influence of a downtrend in daily production, there was an intention to place orders downstream, with actual transactions happening mostly at lower prices. Midweek, expectations of reduced supply and the influence of device maintenance led to a more positive purchasing atmosphere, improved transactions, and a consequent moderate increase in market prices. Most companies, influenced by policies to ensure supply and stabilize prices, kept their factory prices steady. Towards the end of the week, most companies had good order receipts, and with sufficient pending shipments, the overall pre-receipts continued to be around a week. Some companies continued to accept new orders, but downstream purchasing was influenced by the news, resulting in average transactions and a prevalent bearish sentiment.

Urea Delivery Regional Pricing:
Specifically, prices in the Northeast region fell to 2500-2530 yuan/ton. In North China, prices dropped to 2350-2480 yuan/ton. In the Northwest, prices rose to 2500-2510 yuan/ton. In the Southwest, prices remained stable at 2480-2800 yuan/ton. In East China, prices increased to 2460-2510 yuan/ton. In Central China, small and medium particle prices rose to 2470-2650 yuan/ton, while large particle prices remained stable at 2580-2660 yuan/ton. In South China, prices increased to 2620-2680 yuan/ton.

Futures Warehouse Receipt Distribution:
As of this Thursday, Zhengzhou Commodity Exchange urea futures had 6622 receipts, an increase of 102 from last week.

Industry Chain Dynamics

Rapid Recovery in Daily Production:
This week, domestic urea production was about 1.2243 million tons, a decrease of 0.0328 million tons week-on-week, a 2.61% decline, but an 18.79% increase year-on-year. The daily production was 0.1749 million tons. Although there was a slight decrease in daily production during the week, it was still higher than the same period in the previous year. The operating rate of the domestic urea industry was about 79.40%, a 2.13% decrease week-on-week but a 13.45% increase year-on-year.

By Product Type:
Large particle urea production was about 0.1996 million tons, a 0.0121 million ton decrease week-on-week, a 5.72% decline, but a 0.0579 million ton increase year-on-year, a 286.03% increase. The operating rate for large particles was about 68.80%, a 4.17% decrease from last week but a 15.41% increase from the previous year. Small and medium particle urea production was about 1.0247 million tons, a 0.0207 million ton decrease week-on-week, a 1.98% decline, but a 0.1358 million ton increase year-on-year, a 15.28% increase. The operating rate for small and medium particles was about 81.86%, a 1.65% decrease from last week but a 13.34% increase from the previous year.

By Production Process:
Coal-based urea production was about 0.9526 million tons, a 0.0199 million ton decrease week-on-week, but a 0.1812 million ton increase year-on-year. The operating rate was about 81.40%, a 1.70% decrease week-on-week, but a 14.69% increase year-on-year. Gas-based urea production was about 0.2717 million tons, a 0.0129 million ton decrease week-on-week, but a 0.0125 million ton increase year-on-year. The operating rate was about 73.12%, a 3.47% decrease week-on-week but a 9.34% increase year-on-year.

Market Inventory:
This week, company inventory was about 0.4950 million tons, a 0.0216 million ton increase week-on-week, a 4.56% increase, but a 0.5221 million ton decrease year-on-year, a 51.33% decline. Port inventory was 0.2120 million tons, a 0.0030 million ton increase week-on-week, a 1.44% increase, but a 0.1140 million ton decrease year-on-year, a 34.97% decrease. This week, port inventory continued to leave port, company inventory accumulated, and inventory increased.

For domestic large particle urea, port inventory was 0.1100 million tons, a 0.0030 million ton decrease week-on-week, a 2.65% decrease, but a 0.0780 million ton increase year-on-year. Port inventory of large particle urea continued to decrease slightly this week, slightly higher than the same period last year.

For domestic small particle urea, port inventory was 0.1020 million tons, a 0.0060 million ton increase week-on-week, a 6.25% increase, but a 0.1920 million ton decrease year-on-year. Port inventory of small particle urea increased slightly this week but was still lower than the same period last year.

Compound Fertilizer Industry:
This week, domestic compound fertilizer market prices remained stable overall. From the enterprise perspective, companies had ample pending orders and actively fulfilled previous orders, continuing to ship products. In the market, new order transactions were still weak, and overall follow-up was slow. Company quotations were mostly stable with minor adjustments, and operations were relatively firm. In terms of supply, most companies had high capacity utilization rates, and production slightly increased, with current supply being sufficient. Regarding demand, the winter storage fertilizer period was shortened, and downstream purchasing confidence slightly recovered, but actual fertilizer use for winter storage was minimal, and downstream reception was not active, leading to a wait-and-see attitude. In summary, there is still demand in the current compound fertilizer market, and companies are willing to make concessions to attract orders. It is expected that the short-term market activity of compound fertilizer will increase slightly, and prices will continue to undergo narrow-range consolidation.

Melamine Industry:
This week, the melamine market price trended downward, with a weak atmosphere and prices consolidating at a lower level. From the factory perspective, company quotations were mostly reduced to close deals, and some companies slightly increased prices due to rising costs, but the actual price adjustments were minor, leading to a stalemate in market prices. In terms of supply, some units stopped for maintenance this week, leading to a decrease in the operating rate, but the overall rate remained high. Regarding demand, downstream demand was average, mainly following up on immediate needs. As prices decreased, downstream manufacturers followed up in a timely and sufficient manner, leading to more active purchasing. In summary, the current melamine market has sufficient supply, and the market is actively purchasing at low prices, with overall little change. It is expected that melamine market prices will undergo minor range-bound consolidation next week.

International Market Quotes:
Internationally, the FOB price of bulk small particle urea from China was 360-370 USD/ton, unchanged from last week. The FOB price in the Baltic Sea was 250-270 USD/ton, with the high end decreasing by 10 USD/ton.

The FOB price of large particle urea from China was 375-380 USD/ton, unchanged from last week. The FOB price of large particle urea from Iran was 310-315 USD/ton, with the low end decreasing by 6 USD/ton.

Market Outlook:

Supply:
Next week, more company units are expected to undergo maintenance, and urea supply is expected to continue to decline.

Inventory:
With a reduction in daily production, inventory accumulation is expected to slow down, but port inventory might still have inflows. Overall inventory changes are expected to be small next week.

Demand:
With a reduction in supply, there is a willingness for agricultural reserves to replenish, but due to current news influences, the pace of restocking is delayed, with a predominant wait-and-see attitude.