Urea Weekly Review: Pre-Chinese New Year Orders Satisfactory, Market Conditions Improve

Market Overview:

Feidoodoo Price Index:
This week witnessed an improvement in the urea market, with enterprises successfully securing orders at lower prices, resulting in a bottoming out and rebound in prices.

According to Fertilizer Duo data: As of this Friday, the average price index for small urea granules in the domestic market was 2254.87, an increase of 5.52 compared to the previous week, representing a 0.25% week-on-week rise.

At the beginning of the week, many factories continued to concentrate on pre-receiving orders for the Chinese New Year. Some factories, after reducing prices, received orders well. Market participants followed suit at lower prices, and agricultural shipments actively followed. However, industrial compound fertilizer sales were sluggish. Most factories maintained a low operating rate, leading to reduced enthusiasm for raw material procurement. Supported by pending orders, enterprises strongly expressed their intention to maintain prices, with slight upward adjustments in quotes to control orders. High-end quotes showed signs of converging towards the low end.

Mid-week, market trading continued to improve, with enterprise quotes slightly rising and consolidating. Some enterprises had not yet fulfilled their Chinese New Year orders, continuing to receive orders at lower prices. Quotes remained stable, and the low-end market prices gradually approached the high end. Inspection enterprises continued to gradually recover, and although supply increased, the tight spot supply, influenced by good enterprise order reception, provided short-term favorable support. Downstream participants entered the market appropriately at lower prices.

By the end of the week, the pre-Chinese New Year order collection by manufacturers gradually entered the final stage. Quotes remained stable with slight adjustments, and the overall market operated firmly. The downstream enthusiasm for price increases declined, with sheet metal factories gradually closing for the holiday, and the operating rate of compound fertilizer enterprises continued to decline. Agricultural demand followed with limitations, compounded by the impact of rain and snow weather, restricting factory goods transportation. The market transaction atmosphere began to weaken, and the lack of momentum in price increases persisted. However, looking at the enterprise inventory reduction this week, it provided support to market prices. The overall prices stabilized with oscillations.

Quoted Prices in Delivery Areas:

Specifically, prices rose to 2190-2270 yuan/ton in the Northeast region. Prices in North China fell to 2020-2280 yuan/ton. Prices in East China rose to 2170-2240 yuan/ton. Prices in South China rose to 2350-2400 yuan/ton. In Central China, small granule prices rose to 2170-2380 yuan/ton, and large granule prices rose to 2240-2320 yuan/ton. Prices in Northwest China rose to 2210-2220 yuan/ton. Prices in Southwest China rose to 2230-2600 yuan/ton.

Futures Warehouse Receipt Distribution:

As of this Thursday, the warehouse receipts for urea futures on Zhengzhou Commodity Exchange were 9049, a decrease of 978 compared to the previous week.

Industry Chain Dynamics:

Daily Production Situation:

• Production Volume: This week, the domestic urea production volume was approximately 1.2048 million tons, an increase of 1.45 compared to the previous week, representing a 1.22% week-on-week increase and a 10.80% year-on-year increase. The daily production was 172,100 tons, with continuous recovery of the inspection units, leading to an increase in daily production, continuing to be higher than the same period in the previous year.
• Operating Rate: The domestic urea industry's operating rate is approximately 79.48%, a 0.95% week-on-week increase and a 5.17% year-on-year increase. The operating rate of the domestic urea industry continues to be higher than the same period last year. By Particle Size: The production volume of large granule urea was approximately 241,600 tons, a decrease of 0.09 million tons compared to the previous week, a 0.37% week-on-week decrease, and a 21.41% year-on-year increase. The operating rate for large granules was approximately 84.01%, a 0.31% week-on-week decrease, and a 9.03% year-on-year increase. The production volume of small and medium granule urea was approximately 963,200 tons, an increase of 15,400 tons compared to the previous week, a 1.62% week-on-week increase, and an 8.42% year-on-year increase. The operating rate for small and medium granules was approximately 78.42%, a 1.25% week-on-week increase, and a 4.26% year-on-year increase. By Technology: The production volume of coal-based urea was approximately 992,100 tons, a decrease of 29,000 tons compared to the previous week, and an increase of 73,400 tons compared to last year. The operating rate was approximately 86.71%, a 2.53% week-on-week decrease, and a 2.56% year-on-year increase. The production volume of gas-based urea was approximately 212,700 tons, an increase of 43,500 tons compared to the previous week, and an increase of 44,000 tons compared to last year. The operating rate was approximately 57.24%, an 11.71% week-on-week increase, and an 11.84% year-on-year increase.

Market Inventory:

• Enterprise Inventory: This week, enterprise inventory was approximately 532,000 tons, a decrease of 52,000 tons compared to the previous week, an 8.90% week-on-week decrease, and a 50.24% year-on-year decrease.
• Port Inventory: Port inventory totaled 168,500 tons, remaining unchanged from the previous week, and decreasing by 33,500 tons compared to the same period last year, a 16.58% year-on-year decrease.Large Granule: This week, domestic large granule urea port inventory was 88,000 tons, remaining unchanged from the previous week, and increasing by 39,000 tons compared to the same period last year. The port volume of large granule urea remained stable during the week, still higher than in the same period last year. Small Granule: This week, domestic small granule urea port inventory was 80,500 tons, remaining unchanged from the previous week, and decreasing by 72,500 tons compared to the same period last year. The port volume of small granule urea remained stable during the week, continuing to be lower than in the same period last year.

Compound Fertilizer Industry:

This week, the domestic compound fertilizer market prices continued to undergo slight downward adjustments, maintaining a trend of overall stability with minor declines.

As of this Friday, the price for 45%S was 2952.50, and for 45%CL was 2610.00. Regarding enterprises, some small and medium-sized enterprises have gradually entered the holiday state. Factory quotations remain stable, with limited actual transactions conducted through single orders and negotiations. In terms of the market, the current industry's shipment improvement is limited, and the overall atmosphere is gradually becoming weaker. The market is gradually entering a holiday state, and overall, there is price stability without market activity. In terms of supply, the operating rate of the compound fertilizer market this week was 30.18%, a decrease of 3.50% compared to the previous week. The industry's capacity utilization continues to decline, but the finished product inventory of enterprises has increased slightly. In terms of demand, pre-holiday demand has faded, and downstream follow-up is limited. Overall, the current state of the compound fertilizer market before the holiday is unlikely to change, and it is expected that the compound fertilizer market will continue to undergo overall stability with minor adjustments in the short term.

Melamine Industry:

This week, the melamine market prices remained stable.

Regarding factories, some manufacturers' pre-receiving orders have reached the Chinese New Year, starting to limit orders. Currently, the main focus is on pending orders, orderly shipments, and a relatively firm mentality. Quotations remain stable. Regarding the market, with the approach of the Chinese New Year, market activity has decreased, and the overall trading atmosphere is flat. Short-term market conditions continue to be flat. In terms of supply, some parking facilities have gradually resumed operations in the early stages. The industry's capacity utilization rate has increased compared to the previous week, reaching 66.78%. It is expected that domestic production will be maintained at a high level during the Chinese New Year. In terms of demand, downstream factories are gradually taking leave, reducing just-in-time purchases, with limited demand for stockpiling. Overall, the current atmosphere in the melamine market is sluggish, and there is no improvement in downstream follow-up before the holiday. It is expected that the melamine market prices will continue to undergo overall stability with minor fluctuations next week.

International Market Quotations:

In the international market, the FOB price for bulk small urea granules from China is 316-326 USD/ton, a decrease of 1-8 USD/ton compared to the previous week. The FOB price for the Baltic Sea is 295-315 USD/ton, an increase of 5-20 USD/ton.

For large granules, the FOB price from China is 355-360 USD/ton, remaining unchanged from the previous week. The FOB price for large granules from Iran is 331-335 USD/ton, an increase of 5-11 USD/ton.

Market Outlook:

Supply: Gas-based enterprises continue to gradually resume production, and daily production steadily increases.

Inventory: This week, enterprise order collection was good, and inventory decreased. Order fulfillment will continue next week, and inventory will oscillate and consolidate.

Demand: Agricultural demand has entered the procurement tail period this week. Many downstream factories in the industrial sector have already stopped production for the holiday, and the continuation of positive demand is difficult. It is expected that the market will operate flatly next week.