Urea Weekly Review: Agricultural Demand Emerges, Prices Stabilize After Post-Holiday Increase

Market Overview:

Feidoodoo Price Index:

This week, the urea market experienced a positive post-holiday trading atmosphere, with quotations generally trending upwards. As market sentiment influenced later stages, prices gradually adjusted downwards in small increments.

According to Feidoodoo data calculations: As of this Friday, the domestic urea granule price index average was 2328.31, an increase of 71.04 from last week, marking a 3.15% rise.

In the first half of the week, post-holiday market transactions began to improve, with agricultural market demand kicking in. Agricultural needs led to moderate purchasing, creating an active trading atmosphere in the market, which, combined with the support of pending orders for many enterprises, eased shipping pressures and bolstered a strong mindset. This led to upward adjustments in quotations, continuously shifting the market's transaction focus upwards, and prices sustained an upward trend.

In the latter half of the week, influenced by rainy and snowy weather in the north and high market prices, the pace of transactions gradually slowed, cooling the market atmosphere. Additionally, with high industry operation rates and minimal equipment failures and maintenance, the market was well-supplied, which, coupled with declining agricultural shipments and unconnected industrial demand driven by market sentiment, slowed the price increase and curbed upward momentum.

Delivery Area Quotations:

Specifically, prices in the Northeast region rose to 2290-2370 RMB/ton. In the North China region, prices increased to 2280-2390 RMB/ton. In the East China region, prices went up to 2230-2300 RMB/ton. Prices in the South China region increased to 2380-2420 RMB/ton. In the Central China region, small and medium granule prices rose to 2240-2380 RMB/ton, while large granule prices increased to 2310-2400 RMB/ton. Prices in the Northwest region rose to 2320-2330 RMB/ton. In the Southwest region, prices increased to 2300-2600 RMB/ton.

Futures Warehouse Receipt Distribution:

As of this Thursday, Zhengzhou Commodity Exchange urea futures stood at 8029 receipts, a decrease of 1225 from before the holiday.

Industry Chain Dynamics:

Daily Production:

Production: This week, domestic urea production was approximately 1.3173 million tons, a decrease of 0.49 from last week, down 0.37% sequentially, but up 16.80% year-over-year. Daily production was 188,200 tons. Despite a slight decrease in weekly industry output, overall operations remained high, with post-holiday equipment restarts ongoing.

Operation Rates: The domestic urea industry's operation rate was about 86.90%, down 0.33% sequentially but up 9.83% year-over-year. Although there was a slight decrease, operation rates remained higher than the same period last year.

By granule size, large granule urea production was approximately 241,900 tons, an increase of 900 tons from last week, up 0.37% sequentially, and up 36,000 tons, or 17.48% year-over-year. The operation rate for large granules was about 84.11%, up 0.31% from last week and 6.53% year-over-year. Small and medium granule production was about 1.0754 million tons, down 5800 tons from last week, a 0.54% sequential decrease but a 16.65% increase year-over-year. The operation rate for small and medium granules was about 87.56%, down 0.47% from last week but up 10.61% year-over-year.

By production process, coal-based urea production was about 1.01 million tons, down 12,000 tons from last week but up 97,600 tons year-over-year. The operation rate was about 88.27%, down 1.05% from last week but up 4.70% year-over-year. Gas-based urea production was about 307,500 tons, up 7100 tons from last week and up 91,900 tons year-over-year. The operation rate was about 82.70%, up 1.91% from last week and 24.73% year-over-year.

Market Inventory:

Enterprises: This week, enterprise inventory levels were about 806,400 tons, down 11,700 tons from last week, a 1.43% sequential decrease and a 12.97% decrease year-over-year.

Ports: Port inventories totaled 187,000 tons, up 4000 tons from last week, a 2.19% sequential increase, and up 13,000 tons, or 7.47% year-over-year.

Large Granules: Domestic large granule urea port inventories were 112,000 tons this week, up 1000 tons from last week, a 0.90% sequential increase, and up 62,000 tons year-over-year, indicating a slight weekly increase and continuing to exceed last year's levels.

Small Granules: Domestic small granule urea port inventories were 75,000 tons this week, up 3000 tons from last week, a 4.17% sequential increase, but down 49,000 tons year-over-year, indicating a slight weekly increase but remaining below last year's levels.

Compound Fertilizer Industry:

This week, domestic compound fertilizer market prices operated steadily, with factory quotations mostly involving discreet decreases and actual orders negotiated.

As of this Friday, domestic 45%S prices were 2900.83; 45%CL prices were 2577.27. From the enterprise perspective, many were dispatching pre-received orders, with prices operating steadily and maintaining pre-holiday levels, with some transactions involving discreet discounts. On the market side, the trading atmosphere was cautious, with slow shipments. On the supply side, the compound fertilizer market's operation rate was 32.79% this week, up 4.90% from last week, as holiday shutdowns gradually resumed, industry capacity utilization rates gradually increased, enterprise finished product inventories rose, and industry supply was relatively relaxed. On the demand side, some post-holiday replenishment demand was released, but rainy and snowy weather significantly impacted market sentiment. Overall, the post-holiday compound fertilizer market trading atmosphere is gradually recovering, with prices expected to remain stable in the short term.

Melamine Industry:

This week, the melamine market prices stabilized after a post-holiday increase, with factory quotations tentatively adjusted upwards.

From the factory perspective, many focused on fulfilling pre-holiday orders, with tentative price increases. On the market side, rainy and snowy weather in some northern regions hindered shipments, limiting market transactions. On the supply side, industry capacity utilization rates increased post-holiday but decreased from last week to 71.18%, with next week's industry operation expected to remain high, impacting prices negatively. On the demand side, downstream operations have not fully resumed, but with the end of the Lantern Festival, most factories are expected to resume operations, and demand-side positives are expected to emerge gradually. Overall, with high supply levels and not fully recovered demand, the follow-up strength is weaker, and next week's melamine market prices are expected to continue their stable yet minor fluctuations.

International Market Quotations:

Internationally, the bulk small granule Chinese FOB price was 337-342 USD/ton, up 13-16 USD/ton from last week; the Baltic FOB price was 300-310 USD/ton, the high end down 10 USD/ton.

Large granule Chinese FOB price was 345 USD/ton, the high end down 5 USD/ton; Iranian large granule FOB price was 340-350 USD/ton, down 2-10 USD/ton.

Market Outlook:

Supply: With few planned shutdowns next week, market supply is expected to remain high.

Inventory: As post-holiday transportation gradually resumes and market shipments increase, next week's enterprise inventory levels are expected to decrease slightly.

Demand: Influenced by market sentiment and rainy and snowy weather, agricultural demand slows; industrial demand follows slowly, with no positives yet apparent, and next week may see a willingness to replenish stocks.