Urea Weekly Review: Market Trades in a Weak Atmosphere, Prices Slightly Fluctuating

Market Overview

Feidoodoo Price Index:

This week, the urea market prices fluctuated, showing an overall trend of fall-rise-fall. Companies adjusted their prices based on pending orders and new order intake, with overall fluctuations being small and narrowing range. By the end of this week, the average price index for small particle urea was 2526.25, down by 22.94 from last week, a 0.90% week-over-week decrease.

At the beginning of the week, mainstream companies continued to maintain firm prices supported by pending orders. Some factories, affected by a gradual reduction in pending orders, slightly lowered their prices. However, most companies were inclined to increase their inventories, limiting the extent of price reductions. With limited enthusiasm for higher prices under supply guarantee policies, the market adopted a watchful stance, resulting in relatively firm urea prices with minimal adjustments.

Mid-week, market prices began to show mixed trends of increases and decreases. In regions with better transactions, prices were adjusted upwards to control orders. For new orders in areas with fewer transactions, prices were slightly reduced to attract buyers. The overall market trend started to show an upward trajectory. However, due to the off-season in agricultural demand and a wait-and-see attitude towards winter storage, significant upward price movements were constrained. Nevertheless, positive market sentiment, spurred by reduced production expectations, led to cautious and limited purchasing at low prices.

Towards the end of the week, companies generally saw good order intake. After price increases, new order transactions significantly reduced. The continuous impact of export downturns on the market reduced the likelihood of significant changes, leading companies to reorganize their prices. Thus, the market was caught in a dilemma of rising and falling prices, with most areas maintaining stability with minor adjustments.

Urea Delivery Area Prices

Specifically, in the Northeast region, prices fell to 2510-2550 RMB/ton. In North China, prices fell to 2330-2560 RMB/ton. In the Northwest region, prices fell to 2470-2480 RMB/ton. In the Southwest region, prices stabilized after falling to 2480-2800 RMB/ton. In East China, prices fell to 2430-2470 RMB/ton. In Central China, small particle prices fell to 2440-2650 RMB/ton, while large particle prices stabilized at 2580-2660 RMB/ton. In South China, prices fell to 2610-2660 RMB/ton.

Futures Warehouse Receipt Distribution

As of this Thursday, Zhengzhou Commodity Exchange urea futures had 6520 warehouse receipts, an increase of 131 compared to last week, with a cumulative delivery of 1600 in November.

Industrial Chain Dynamics

Daily Production Rapidly Recovering:

This week, the domestic urea production was approximately 125.71 thousand tons, a 1.65 thousand ton increase week-over-week (1.33% increase), and a 19.03% increase year-over-year. The daily production was 17.96 thousand tons, slightly increasing within the week but still higher than the same period in 2022. The domestic urea industry's operating rate was about 81.53%, up by 1.07% week-over-week, and 13.95% higher year-over-year.

Regarding types, large particle urea production was about 21.17 thousand tons, down by 1.99 thousand tons week-over-week (8.59% decrease) but up by 8.79 thousand tons year-over-year (497.01% increase). The operating rate for large particle urea was about 72.97%, down by 6.86% week-over-week but up by 26.32% year-over-year. Small particle urea production was about 104.54 thousand tons, up by 3.64 thousand tons week-over-week (3.61% increase) and 11.30 thousand tons year-over-year (12.12% increase). The operating rate for small particles was about 83.51%, up by 2.91% week-over-week and 11.64% year-over-year.

In terms of production processes, coal-based urea production was about 97.25 thousand tons, up by 1.26 thousand tons week-over-week and 19.85 thousand tons year-over-year. The operating rate was about 83.10%, up by 1.08% week-over-week and 16.16% year-over-year. Gas-based urea production was about 28.46 thousand tons, up by 0.39 thousand tons week-over-week and 0.25 thousand tons year-over-year. The operating rate was about 76.59%, up by 1.05% week-over-week and 7.18% year-over-year.

Market Inventory

This week, enterprise inventory was about 473.4 thousand tons, up by 3.71 thousand tons week-over-week (8.50% increase) but down by 51.77 thousand tons year-over-year (52.23% decrease). Port inventory was 209.0 thousand tons, down by 11.0 thousand tons week-over-week (34.48% decrease) and down by 3.80 thousand tons year-over-year (15.38% decrease). This week, port inventories continued to depart, and enterprises controlled order intake, leading to a decrease in port inventory and an increase in enterprise inventory.

For large particle urea, port inventory was 113.0 thousand tons, down by 1.0 thousand tons week-over-week (8.13% decrease) but up by 2.30 thousand tons year-over-year. Large particle urea port inventory continued to decrease slightly this week but is still slightly higher than last year.

For small particle urea, port inventory was 96.0 thousand tons, down by 10.0 thousand tons week-over-week (51.02% decrease) and down by 61.0 thousand tons year-over-year. Small particle urea port inventory significantly decreased this week and is lower than last year.

Compound Fertilizer Industry

This week, domestic compound fertilizer market prices rose narrowly and remained firm. From the enterprise perspective, most companies still had pending orders to execute. Recently, the industry's morale has been somewhat weak, leading to a general sentiment among distributors and a flat market transaction. On the supply side, as enterprises increased their operational loads, production correspondingly rose, but overall capacity utilization did not change significantly. Due to lower operational rates earlier, current enterprise inventory buildup is limited. Demand-wise, previous orders continued to be dispatched, and new order transactions were cautious. Overall, the compound fertilizer market is supported by raw material prices, with enterprise orders gradually being dispatched. Short-term compound fertilizer prices are expected to continue high-level narrow adjustments.

Melamine Industry

This week, melamine market prices declined, with actual transactions moving lower and the market gradually shifting towards the lower end. Factory-wise, as previous pre-orders gradually decreased and new orders did not follow up sufficiently, many manufacturers, under sales pressure, lowered their prices to attract orders, slightly improving order intake. On the supply side, although some maintenance devices are expected to restart soon, the overall operating rate remains high, making it difficult for prices to rise in a supply-abundant situation. Demand-wise, downstream demand is sluggish, with a cautious sentiment prevailing, leading to a generally quiet market transaction atmosphere. In the near term, the melamine market faces weak demand and sufficient supply, increasing the watchful attitude of business operators. Next week's melamine market prices are expected to have downward potential.

International Market Quotations

Internationally, bulk small particle Chinese FOB prices are 360-370 USD/ton, down by 5 USD/ton; Baltic FOB prices are 250-280 USD/ton, down by 20-25 USD/ton. Large particle Chinese FOB prices are 375-380 USD/ton, unchanged from last week; Iranian large particle FOB prices are 310-321 USD/ton, down by 10 USD/ton at the low end.

Market Outlook

Supply: Next week, more enterprise devices are expected to undergo maintenance, and gas-head devices will gradually shut down, leading to a likely decrease in daily production compared to this week.

Inventory: Enterprises continue to control order intake to accumulate inventory, with room for further inventory increase expected.

Demand: Agricultural demand remains weak, with slow follow-up in reserves and limited demand; the compound fertilizer industry anticipates an increase in operational rates, potentially increasing urea demand.