Urea Weekly Review: Overall Price Decline, Weak Market Atmosphere

Market Overview:

Feidoodoo Index:

This week, the urea market experienced an overall price decline, operating in a weak market atmosphere.

According to Feidoodoo Index data: As of this Friday, the average price index for domestic small particle urea was 2487.05, a decrease of 31.54 from last week, down 1.25% week-on-week.

At the beginning of the week, the market operated weakly, with prices continuing to slightly decline. Enterprises continued to ship pre-received orders, but shipments were affected by weather, leading to transportation difficulties and pressure on enterprise shipments. Downstream purchasing was cautious due to relatively limited demand, and the market atmosphere continued to decline. Planned maintenance of plants contributed to a supply reduction, providing some support to prices.

Midweek, prices continued to decline, with a wider downward range, and the market operated weakly. Manufacturers reduced quotations to accept new orders due to a gradual decrease in pending orders, but the market atmosphere was poor due to cautious winter storage purchasing in agriculture, decreased industrial compound fertilizer production, and limited purchasing. This resulted in weak demand-side support, with a short-term focus on plant shutdowns.

At the end of the week, after a round of slight price adjustments, market low-end transactions improved. Some manufacturers slightly increased prices, and with pending order support, there was an increased willingness to hold prices. The market continued to see limited just-in-time replenishment, but the atmosphere remained low. Additionally, India's announcement of a new tender round had little impact on the domestic market and was unlikely to be a positive factor.

Urea Delivery Area Quotations:

Specifically, prices in the Northeast region dropped to 2470-2510 yuan/ton. In North China, prices dropped to 2260-2510 yuan/ton. In the Northwest, prices dropped to 2410-2420 yuan/ton. In the Southwest, prices dropped to 2450-2800 yuan/ton. In East China, prices dropped to 2400-2450 yuan/ton. In Central China, small and medium particle prices dropped to 2380-2600 yuan/ton, and large particle prices dropped to 2440-2560 yuan/ton. In South China, prices dropped to 2530-2620 yuan/ton.

Futures Warehouse Receipt Distribution:

As of this Thursday, Zhengzhou Commodity Exchange urea futures had 10,078 receipts, up 1249 from last week.

Industry Chain Dynamics:

Daily Production Situation:

Production: This week, domestic urea production was about 1.16 million tons, down 7.98 from last week, a decrease of 6.43% week-on-week, and an increase of 13.95% year-on-year. The daily production was 165,800 tons, with a decrease in daily production throughout the week, but still higher than the same period in 2022.

Operating Rate: The domestic urea industry operating rate was about 75.27%, down 5.18% week-on-week, and up 10.09% year-on-year. The operating rate decreased but remained higher than the same period last year.

This week, plants with planned maintenance gradually fulfilled their plans, with daily production and operating rates showing a downward trend. Additionally, many gas-based urea plants shut down this week, with production expected to resume gradually in February next year.

By Type: Large particle urea production was about 212,200 tons, down 1,600 tons week-on-week, a decrease of 0.75%, and up 35,000 tons year-on-year, an increase of 138.26%. The large particle operating rate was about 73.15%, down 0.55% week-on-week, and up 6.38% year-on-year. Small and medium particle urea production was about 948,400 tons, down 78,200 tons week-on-week, a decrease of 7.62%, and up 107,100 tons year-on-year, an increase of 12.73%. The small and medium particle operating rate was about 75.76%, down 6.25 week-on-week, and up 10.91% year-on-year.

By Process: Coal-based urea production was about 959,900 tons, down 17,000 tons week-on-week, and up 102,000 tons year-on-year. The operating rate was about 82.02%, down 1.45% week-on-week, and up 7.83% year-on-year. Gas-based urea production was about 200,700 tons, down 62,800 tons week-on-week, and up 40,100 tons year-on-year. The operating rate was about 54.01%, down 16.90% week-on-week, and up 14.49% year-on-year.

Market Inventory:

Enterprises: This week, enterprise inventory was about 578,000 tons, up 35,300 tons week-on-week, an increase of 6.50%, and down 266,900 tons year-on-year, a decrease of 31.59%.

Ports: Port inventory totaled 189,000 tons, down 1,000 tons week-on-week, a decrease of 0.53%, and up 68,000 tons year-on-year, an increase of 56.20%.

Large Particles: This week, domestic large particle urea port inventory was 107,000 tons, up 7,000 tons week-on-week, an increase of 7.00%, and up 72,000 tons year-on-year. The large particle urea port inventory slightly increased this week, continuing to be higher than the same period last year.

Small Particles: This week, domestic small particle urea port inventory was 82,000 tons, down 8,000 tons week-on-week, a decrease of 8.89%, and down 4,000 tons year-on-year. The small particle urea port inventory continued to decrease this week, slightly lower than the same period last year.

Compound Fertilizer Industry:

This week, domestic compound fertilizer market prices were stable with a slight downward adjustment. As of this Friday, the domestic 45%S price was 3035.00 yuan; the 45%CL price was 2680.91 yuan. On the enterprise side, enterprises had ample pending orders, mainly fulfilling earlier pre-received orders, with few new orders and no new prices announced. On the market side, the market atmosphere was low, with decreased enthusiasm among traders for market entry, and shipments slowed due to road snow blocking transport. On the supply side, the compound fertilizer market operating rate was 42.17% this week, down 5.46% week-on-week, with a decline in operating rates as compound fertilizer enterprises reduced production due to cost and demand influences. On the demand side, winter storage of fertilizers progressed slowly, with few new orders. In summary, the current compound fertilizer market operating rate is declining, with enterprises gradually shipping goods, and it is expected that in the short term, compound fertilizer market prices will continue to be stable with minor adjustments.

Melamine Industry:

This week, the melamine market prices were stable with a slight upward adjustment. On the factory side, manufacturers had ample pre-received orders, orderly executing pending orders. On the market side, this week's market transactions turned warmer, with end-of-year stockpiling behavior emerging, and many traders actively entering the market for negotiations and purchasing. On the supply side, market supply was relatively tight due to transportation issues caused by rain and snow, and some enterprise plants undergoing maintenance and shutdown this week. On the demand side, overall demand was good, although starting slowly, with traders mostly purchasing at low prices. In summary, the melamine market atmosphere has improved, with good order receipts at enterprises, and it is expected that melamine market prices will continue to be stable with minor fluctuations next week.

International Market Quotations:

Internationally, bulk small particle Chinese FOB price was 350-355 USD/ton, down 10 USD/ton from last week; the Baltic Sea FOB price was 240-260 USD/ton, with the low end up 5 USD/ton and the high end down 10 USD/ton.

Large particle Chinese FOB price was 360-370 USD/ton, down 10 USD/ton from last week; Iranian large particle FOB price was 280-290 USD/ton, down 20-25 USD/ton.

Market Outlook:

Supply: The supply continues to show a reduction trend, with daily production expected to continue decreasing next week.

Inventory: Affected by rain and snow weather, enterprise inventory continues to increase, with inventory expected to continue increasing next week.

Demand: Agricultural winter storage fertilizers remain cautious, with slow follow-ups; industrial demand is affected by high-cost prices, leading to reduced production, with demand expected to continue with limited sporadic replenishment.