Urea Weekly Review: Pre-Spring Festival Order Collection Ongoing, Factory Quotes Continue to Explore Lower Levels

Market Overview:

Feidoodoo Price Index:

This week, the urea market prices continued to probe lower as enterprises continued to collect orders before the Spring Festival, with transaction prices converging towards the lower end.

According to Fertile Much data calculations: By this Friday, the domestic urea small granules price index average was 2249.35, a decrease of 78.38 from last week, down by 3.37%.

At the beginning of the week, factories lowered their quotations to attract orders. With the Spring Festival holiday approaching and most urea factories still facing pre-holiday order collection pressure, coupled with expectations of increased supply, the market purchasing sentiment remained cautious. Some factories planned to increase pre-sale discounts for order collection, but downstream demand was relatively limited, maintaining just-in-time sales with a cautious purchasing mentality, resulting in many low-price transactions in the market.

Mid-week, the actual market transactions continued at a low level without signs of improvement. Enterprise inventories increased, and shipments were under pressure. With expectations of increased supply, industry supply pressure gradually emerged, and low-priced supplies continued to test the market. Agriculture maintained periodic low-price purchases, industrial compound fertilizer production declined, and the willingness to procure was low, leading to an average overall demand performance in the market, with the trend continuing to weaken.

Towards the end of the week, some regional factories had better low-end price order collection, and the market continued with low-price order collection. With the Spring Festival holiday approaching and factories having pre-sale plans, factory quotations continued to decrease, but transactions remained average due to cautious market sentiment influenced by the traders' reserve needs and just-in-time sporadic follow-up.

Delivery Area Quotations:

Specifically, prices in the Northeast region fell to 2190-2250 RMB/ton. In North China, prices dropped to 2040-2260 RMB/ton. In East China, prices fell to 2130-2230 RMB/ton. In South China, prices decreased to 2330-2400 RMB/ton. In Central China, small and medium granule prices dropped to 2150-2380 RMB/ton, and large granule prices fell to 2180-2250 RMB/ton. In Northwest China, prices fell to 2170-2180 RMB/ton. In Southwest China, prices dropped to 2200-2600 RMB/ton.

Futures Receipt Distribution:

By this Thursday, Zhengzhou Commodity Exchange urea futures stood at 10027, a decrease of 618 from last week.

Industry Chain Dynamics:

Daily Production:

Production: This week, domestic urea production was approximately 1.1903 million tons, an increase of 6.65 from last week, up by 5.92%, and an 11.06% increase year-on-year. The daily production was 170,000 tons, with previously shut-down units gradually resuming, increasing daily production and continuing to exceed the levels of the same period in 2023.

Operating Rate: The domestic urea industry's operating rate was about 78.53%, up by 4.39% week-on-week, and a 5.29% increase year-on-year. The operating rate of the urea industry rose, continuing to be higher than the same period last year.

By type, large granule urea production was approximately 242,500 tons, an increase of 22,900 tons week-on-week, up by 10.43%; an increase of 42,900 tons year-on-year, up by 21.49%. The operating rate for large granules was about 84.32%, up by 7.96% week-on-week, and a 9.34% increase year-on-year. Small and medium granule urea production was approximately 947,800 tons, an increase of 43,600 tons week-on-week, up by 4.82%; an increase of 75,600 tons year-on-year, up by 8.67%. The operating rate for small and medium granules was about 77.17%, up by 3.55% week-on-week, and a 4.37% increase year-on-year.

By process, coal-based urea production was approximately 1.0211 million tons, an increase of 45,000 tons week-on-week and 100,300 tons year-on-year. The operating rate was about 89.24%, up by 3.93% week-on-week, and a 4.90% increase year-on-year. Gas-based urea production was approximately 169,200 tons, an increase of 21,500 tons week-on-week and 18,200 tons year-on-year. The operating rate was about 45.53%, up by 5.78% week-on-week, and a 4.89% increase year-on-year.

Market Inventory:

Enterprises: This week, enterprise inventory levels were about 584,000 tons, an increase of 42,000 tons week-on-week, up by 7.75%; a decrease of 358,300 tons year-on-year, down by 38.02%.

Ports: Port inventories totaled 168,500 tons, a decrease of 1,500 tons week-on-week, down by 0.88%; a decrease of 12,500 tons year-on-year, down by 6.91%.

Large Granules: This week, domestic large granule urea port inventories were 88,000 tons, a decrease of 1,000 tons week-on-week, down by 1.12%; an increase of 48,000 tons year-on-year, with large granule urea port inventories slightly decreasing week-on-week but still higher than the same period last year.

Small Granules: This week, domestic small granule urea port inventories were 80,500 tons, a decrease of 500 tons week-on-week, down by 0.62%; a decrease of 60,500 tons year-on-year, with small granule urea port inventories decreasing week-on-week and continuing to be lower than the same period last year.

Compound Fertilizer Industry:

This week, domestic compound fertilizer market prices slightly adjusted downwards, maintaining a trend of stability with minor declines.

By this Friday, domestic 45%S prices were 2962.50; 45%CL prices were 2613.64. On the enterprise side, although price reductions were limited, actual transaction prices were flexibly adjusted, with noticeable price declines in local spot transactions, and limited new transactions at low prices, leading to continued increases in enterprise finished product inventories. In the market, new transaction volumes were limited, with overall poor sales. On the supply side, the compound fertilizer market's operating rate this week was 33.68%, a decrease of 2.10% week-on-week, with enterprise production enthusiasm impacted and capacity utilization rates continuing to decline. On the demand side, demand follow-up slowed, with a cautious and bearish overall performance. Overall, the current compound fertilizer market transaction atmosphere is sluggish, and it is expected that the short-term compound fertilizer market will continue its weak and narrow range adjustment.

Melamine Industry:

This week, the melamine market adjusted steadily, with prices fluctuating downwards.

On the factory side, factories mainly executed pending orders, with many lowering factory prices to attract downstream stockpiling, overall transactions being satisfactory, with some factories' pre-received orders extending to after the Spring Festival. In the market, the market operated steadily with fluctuations, with a poor transaction atmosphere and a strong wait-and-see sentiment among traders. On the supply side, there were many shutdown units this week, with the industry's capacity utilization rate at 62.61%, keeping the market supply and demand relatively balanced. On the demand side, downstream factories began to take holidays in succession, reducing just-in-time purchases, with the market follow-up mostly for stockpiling needs, currently in gradual follow-up. Overall, the current melamine market atmosphere has weakened, with low operating rates for units, and it is expected that the melamine market prices will continue to operate steadily with minor movements next week.

International Market Quotations:

Internationally, bulk small granule Chinese FOB prices were 317-334 USD/ton, down by 2-15 USD/ton from last week; Baltic FOB prices were 275-310 USD/ton, up by 15-25 USD/ton.

Large granule Chinese FOB prices were 355-360 USD/ton, remaining stable from last week; Iranian large granule FOB prices were 320-330 USD/ton, up by 15-24 USD/ton.

Market Outlook:

Supply: Next week, the head units will continue to resume gradually, with supply continuing to a steady rise.

Inventory: Enterprise daily production increases, market shipments are limited, and inventories continue to grow.

Demand: Market just-in-time needs weaken, follow-up is insufficient, reserve needs purchase at low points, with a cautious and wait-and-see mentality.