Urea Weekly Review: Spring Festival Pre-Ordering Begins, Enterprise Quotations Adjust Downward

Market Overview:

According to the Feidoodoo Price Index, the urea market prices continued to decline this week as factories started to gather orders before the Spring Festival, leading to continuous price adjustments. As of this Friday, the domestic urea small granule price index averaged 2366.16, down by 33.50 from the previous week, a 1.40% decrease.

Early in the week, factories had a high volume of pending orders, and inventories gradually decreased. To gather new orders, some factories slightly decreased their prices, showing a relatively strong intention to hold prices. However, the market, influenced by high prices, showed strong resistance. The agricultural sector, in its off-season for fertilizer use, and the slowdown in downstream factory operations led to cautious stocking and a slowdown in new order transactions compared to the previous week, creating a bland market atmosphere. Additionally, the current round of Indian tenders saw low domestic participation, and with exports limited, the impact on the market was minimal.

Mid-week, factories continued to dispatch pending orders, reducing inventories and operating at low daily production levels, which led to a tight market supply. With expectations of a gradual supply recovery by mid-month, downstream demand was weak, with agriculture maintaining small phased restocking, and industrial factory operations slowly recovering. As a result, enterprises continued to reduce their quotations for pre-Spring Festival orders, and transactions remained negotiated on a case-by-case basis.

Towards the end of the week, most factories started pre-Spring Festival orders, continuing the downward adjustment of quotations. The overall market trading atmosphere remained bearish, and transactions continued to be stagnant. With expectations of equipment recovery, downstream purchasing continued its wait-and-see approach, awaiting the emergence of lower-priced market sources, pulling prices further down. The market continued to operate weakly.

Delivery Area Quotations:

Specifically, prices in the Northeast region fell to 2360-2420 yuan/ton. In the North China region, prices fell to 2090-2420 yuan/ton. In the East China region, prices fell to 2240-2310 yuan/ton. In the South China region, prices fell to 2400-2450 yuan/ton. Prices for small and medium granules in the Central China region fell to 2230-2450 yuan/ton, and large granules fell to 2390-2480 yuan/ton. In the Northwest region, prices fell to 2250-2260 yuan/ton. In the Southwest region, prices rose to 2300-2800 yuan/ton.

Futures Warehouse Receipt Distribution:

As of this Thursday, the Zhengzhou Commodity Exchange urea futures had 10,821 receipts, a decrease of 25 from the previous week.

Industry Chain Dynamics:

Daily Production:

Production: This week, domestic urea production was approximately 1.1677 million tons, down by 4.02 from the previous week, a 3.63% decrease, but a 5.06% increase year-on-year. The daily production was 0.1525 million tons, decreasing within the week but still higher than in 2023.

Operating Rate: The domestic urea industry's operating rate was about 70.44%, down 2.65% from the previous week, but up 0.99% year-on-year. The operating rate decreased but remained higher than the same period last year.

Looking at different types, large granule urea production was approximately 0.1721 million tons, down by 0.0313 million tons from the previous week, a 15.39% decrease, and down 0.0239 million tons year-on-year, a 12.19% decrease. The operating rate for large granules was about 59.84%, down 10.88% from the previous week and down 14.01% year-on-year. Small and medium granule urea production was approximately

0.8956 million tons, down by 0.0089 million tons from the previous week, a 0.98% decrease, but up 0.0753 million tons year-on-year, a 9.18% increase. The operating rate for small and medium granules was about 72.92%, down 0.72% from the previous week, but up 4.45% year-on-year.

Looking at the production processes, coal-based urea production was about 0.9344 million tons, down by 0.0423 million tons from the previous week, but up 0.0358 million tons year-on-year. The operating rate was about 81.66%, down 3.70% from the previous week and down 0.64% year-on-year. Gas-based urea production was about 0.1333 million tons, up 0.0021 million tons from the previous week and up 0.0156 million tons year-on-year. The operating rate was about 35.87%, up 0.56% from the previous week and up 4.20% year-on-year.

Market Inventory:

Enterprises: This week, enterprise inventory was about 0.5179 million tons, down 0.0814 million tons from the previous week, a 13.58% decrease, and down 0.3331 million tons year-on-year, a 39.14% decrease.

Ports: Port inventory totaled 0.1800 million tons, down 0.0020 million tons from the previous week, a 1.10% decrease, and down 0.0270 million tons year-on-year, a 13.04% decrease.

Large Granules: This week, domestic large granule urea port inventory was 0.0980 million tons, down 0.0050 million tons from the previous week, a 4.85% decrease, but up 0.0580 million tons year-on-year. The large granule urea port inventory slightly decreased this week but was still higher than in the same period last year.

Small Granules: This week, domestic small granule urea port inventory was 0.0820 million tons, up 0.0030 million tons from the previous week, a 3.80% increase, but down 0.0850 million tons year-on-year. The small granule urea port inventory increased this week but remained lower than in the same period last year.

Compound Fertilizer Industry:

This week, the domestic compound fertilizer market prices continued to decline, with a weak market atmosphere. As of this Friday, the domestic price for 45%S was 3008.33 yuan/ton; 45%CL was 2631.82 yuan/ton. From the enterprise perspective, enterprises had a decent volume of pending orders, mainly fulfilling pre-orders, with limited price adjustments under the support of pending orders. Some enterprises offered policy optimization, with actual transactions being negotiated on a case-by-case basis. In the market, new order transactions mainly explored lower price points, with mid and low-end sources selling better. In terms of supply, the compound fertilizer market operating rate this week was 37.96%, down 0.18% from the previous week, continuing a slight downward trend. In terms of demand, downstream pick-up intentions were low, with purchasing operations showing little enthusiasm and a prevailing wait-and-see mindset. Overall, the current compound fertilizer market transactions are flexible, and with continued low operating rates, the market is expected to remain weak in the short term.

Melamine Industry:

This week, the melamine market operated weakly, with prices declining. From the factory perspective, current factories faced shipment pressure, with some already starting pre-Spring Festival pre-orders and reducing prices to attract orders, with a

small volume of new orders following suit. In the market, the atmosphere remains stagnant, with a strong wait-and-see sentiment among traders and a bearish purchasing environment. On the supply side, the industry's operating rate remains high, negatively impacting the supply side and putting pressure on price increases. On the demand side, downstream traders show moderate demand, with slow purchasing and general follow-up, as traders mostly enter the market at lower prices. Overall, the current melamine market continues to trade tepidly, with weak supply and demand. As factories reduce prices to attract orders, it is expected that the melamine market will continue to operate weakly next week.

International Market Quotations:

Internationally, the bulk small granule China FOB price was 340-347 USD/ton, up 1-4 USD/ton from the previous week; the Baltic FOB price was 240-270 USD/ton, up 10-20 USD/ton.

Large granule China FOB price was 355-360 USD/ton, holding steady from the previous week; Iranian large granule FOB price was 290-295 USD/ton, with the high end up by 5 USD/ton.

Outlook:

Supply: Supply continues to operate at low levels, with some units temporarily shutting down due to faults. Next week, several gas-head maintenance units are expected to resume production, gradually increasing supply.

Inventory: Enterprises continue to dispatch pre-ordered shipments, reducing inventory and pending orders, with little change expected in inventory next week.

Demand: As market prices continue to explore lower, downstream might opportunistically and moderately stock up, leading to an increase in demand.