Urea Weekly: Sentiment-Driven Rally Gives Way to Fundamentals-Led Rationality (20260612)

1. Urea Market Overview

1.1 FDD Price Index

This week, China’s domestic urea market mainly showed a rise followed by a decline. At the beginning of the week, market sentiment was boosted by news of the cancellation of the export guidance price. Bullish expectations strengthened, producers raised quotations, staged restocking became active, and some regions saw producers holding back cargo.

However, subsequent news of a newly introduced export price cap for India, together with rumors of low prices in India’s tender, weakened export expectations. Market sentiment gradually cooled. Traders shifted from active inquiries to accelerating shipments, new order transactions weakened, and price inversion appeared in some regions.

On the supply side, producer operating rates showed no significant change this week, and national daily output remained at a high level of around 210,000 metric tons. Producer inventories increased slightly. Although traders carried out staged restocking earlier, overall demand momentum remained insufficient. Market follow-through weakened, producer shipments slowed, and inventory pressure increased.

On the demand side, agricultural demand is in a seasonal gap period, with only scattered restocking in some regions, which is insufficient to form strong support. Industrial demand remained weak overall. The compound fertilizer market is in the transition period between the end of summer fertilizer sales and pre-sales for autumn fertilizer. Plant operating rates remained low, and raw material restocking was highly restrained.

Overall, against the backdrop of sufficient supply and weakening staged demand, market sentiment has turned cautious. Downstream buyers are mainly taking a wait-and-see approach, and procurement has slowed. In the short term, the market remains constrained by high supply, high inventories, and weak demand, making it difficult to quickly break the current stalemate. Going forward, attention should be paid to the pace of concentrated agricultural demand and the actual implementation of export shipments.

According to FDD data calculations, as of this Friday, the average domestic small-granule urea price index stood at 1,870.82, up 1.09 from last week, representing a week-on-week increase of 0.06%.

In the first half of the week, the urea market moved firmly upward. Urea futures were supported by news of the cancellation of the export guidance price, leading to a clear recovery in market sentiment and stronger capital participation. Futures prices fluctuated higher, driving bullish expectations in the spot market. In the spot market, most producers raised ex-works quotations accordingly. Traders were relatively active in staged restocking, while some regions saw producers reluctant to sell. The transaction atmosphere improved. Overall, the first half of the week was characterized by sentiment-driven strength.

In the second half of the week, the urea market consolidated with a weaker bias. In the futures market, as news of the export price cap for India and low-price rumors around India’s tender continued to ferment, market sentiment gradually weakened. Urea futures came under pressure and corrected, with prices turning from strong to weak. Open interest declined, and signs of profit-taking by long positions became evident. The spot market lacked follow-through. Weak domestic demand constrained sustained downstream procurement. Traders shifted from active inquiries to faster shipments, new order transactions weakened, and some regions saw price inversion. Overall, the market returned to rationality in the second half of the week, with stronger wait-and-see sentiment and a cooler transaction atmosphere.

1.2 Delivery Region Quotations

By region, prices in Northeast China remained stable at RMB 1,870-1,920/mt. Prices in East China remained stable at RMB 1,790-1,850/mt. In Central China, small and medium-granule prices rose to RMB 1,810-1,920/mt, while large-granule prices remained stable at RMB 1,870-1,890/mt. Prices in North China rose to RMB 1,670-1,910/mt. Prices in South China rose to RMB 1,900-1,940/mt. Prices in Northwest China fell to RMB 1,800-1,820/mt. Prices in Southwest China rose to RMB 1,820-2,150/mt.

2. Industrial Chain Updates

2.1 Daily Production

Output: This week, China’s domestic urea output was approximately 1.5038 million metric tons, down 5,600 metric tons from last week, representing a week-on-week decrease of 0.37% and a year-on-year increase of 4.47%. Daily output stood at 214,800 metric tons. During the week, industry daily output remained above 210,000 metric tons, and supply continued to fluctuate at a high level, leaving the market well supplied. Average daily output was 214,800 metric tons, down 800 metric tons from last week. During the period, Inner Mongolia saw a week-on-week increase in output, while Shandong, Shaanxi, Xinjiang, and other provinces recorded decreases.

Operating rate: The domestic urea industry operating rate was approximately 90.04%, down 0.33 percentage points week on week and up 0.61 percentage points year on year. The operating rate declined during the week but remained above the level recorded in the same period last year. During the period, operating rates increased in Inner Mongolia, Jilin, and other regions, while Gansu, Shaanxi, Shandong, and other provinces saw declines.

By product type, large-granule urea output was approximately 317,500 metric tons, up 29,800 metric tons from last week, representing a week-on-week increase of 10.36%; compared with the same period last year, output decreased by 10,600 metric tons, while the year-on-year change was reported at +3.45%. The large-granule operating rate was approximately 87.39%, up 8.20 percentage points from last week and up 4.55 percentage points year on year.

Small and medium-granule urea output was approximately 1.1863 million metric tons, down 35,400 metric tons from last week, representing a week-on-week decrease of 2.90%; compared with the same period last year, output increased by 53,800 metric tons, representing a year-on-year increase of 4.75%. The operating rate for small and medium-granule urea was approximately 90.77%, down 2.71 percentage points from last week and up 1.68 percentage points year on year.

By production process, coal-based urea output was approximately 1.2337 million metric tons, down 5,500 metric tons from last week and up 93,000 metric tons from the same period last year. The operating rate was approximately 93.90%, down 0.41 percentage points from last week and up 3.63 percentage points year on year.

Gas-based urea output was approximately 270,100 metric tons, down 100 metric tons from last week and down 28,600 metric tons from the same period last year. The operating rate was approximately 75.79%, down 0.02 percentage points from last week and down 4.09 percentage points year on year.

2.2 Market Inventory

Producer inventory: This week, producer inventories stood at approximately 959,400 metric tons, up 68,000 metric tons from last week, representing a week-on-week increase of 7.63%; compared with the same period last year, inventories decreased by 21,200 metric tons, representing a year-on-year decline of 2.16%.

During this period, domestic urea producers saw inventory accumulation. First, demand-side support was weak. The agricultural market is in a fertilizer stocking gap during the wheat harvest season, and industrial operating rates did not provide substantial positive support. As a result, overall downstream purchasing willingness was limited, and cargo flows were not smooth. Second, numerous market rumors increased caution among participants, who mainly adopted a wait-and-see approach. In addition, producers showed an intention to retain inventories in preparation for exports, leading to an overall increase in producer inventories.

Provinces with increased producer inventories included Anhui, Hainan, Hebei, Henan, Hubei, Jiangsu, Inner Mongolia, Qinghai, Shandong, Shanxi, Sichuan, and Xinjiang. Provinces with decreased producer inventories included Gansu and Heilongjiang.

Port inventory: Total port inventory stood at 149,900 metric tons, up 1,000 metric tons from last week, representing a week-on-week increase of 0.67%; compared with the same period last year, inventories decreased by 55,100 metric tons, representing a year-on-year decline of 26.88%.

During this period, India’s tender was finalized, but news related to the export guidance price was still fermenting. Current port collection and statutory inspection still require time, so overall port collection volumes remained limited. This week’s change mainly came from scattered arrivals of large-granule cargo at Yantai Port, while other ports showed little fluctuation.

Large-granule urea: This week, domestic large-granule urea port inventory stood at 100,900 metric tons, up 1,000 metric tons from last week, representing a week-on-week increase of 1.00%; compared with the same period last year, inventories decreased by 59,100 metric tons. Large-granule urea port inventory showed no significant change during the week and remained below the level recorded in the same period last year.

Small-granule urea: This week, domestic small-granule urea port inventory stood at 49,000 metric tons, unchanged from last week; compared with the same period last year, inventories decreased by 12,000 metric tons. Small-granule urea port inventory showed no significant change during the week and remained below the level recorded in the same period last year.

2.3 Compound Fertilizer Industry

This week, China’s domestic compound fertilizer market was characterized by divergent cost movements, pressure from off-season demand, and weak, stalemated trading. Nominal quotations remained stable, while actual transactions were flexible with price concessions. The market showed a clear pattern of prices without volume, and the tug-of-war between upstream and downstream participants intensified.

As of this Friday, the domestic 45% sulfur-based compound fertilizer price index stood at 3,393.33, while the 45% chloride-based compound fertilizer price index stood at 2,881.82.

On the cost side, the three major basic raw materials showed clearly divergent trends, exerting two-way pressure on compound fertilizer. Nitrogen fertilizer raw materials weakened overall, continuously reducing cost support for low-nitrogen and high-nitrogen compound fertilizer formulas. Rising sulfur prices pushed up MAP and DAP production costs, significantly increasing raw material pressure for sulfur-based compound fertilizers. Potash prices remained firm, supporting the market’s lower price range.

On the supply side, the compound fertilizer market operating rate was 33.21% this week, down 0.42 percentage points from last week. Industry operating rates declined slightly. On the one hand, the summer fertilizer market has entered its final stage, and demand has weakened. On the other hand, producers are mainly focused on inventory clearance, while pre-sales for the new season are progressing slowly, and large-scale production switching has not yet begun.

Production loads in Hubei, Southwest China, South China, and other regions remained relatively stable, with most producers adopting a production-to-sales model. In Jiangsu and Anhui, where the season ends slightly later, some producers increased operating loads during the week.

On the demand side, the market is currently in a key transition period between the end of summer field topdressing and the gradual start of pre-sales for autumn wheat base fertilizer. Traditional seasonal rigid demand has entered a temporary gap. Summer corn and rice topdressing demand is now limited to scattered restocking, and bulk purchasing has largely ended. Producers have increased their willingness to clear inventories, but downstream follow-up remains insufficient. Channel inventories of earlier summer fertilizer stocks are still being digested slowly, with no concentrated restocking activity.

Overall, the market is in the transition between the summer and autumn seasons. Rigid demand support has weakened, while raw material prices remain high and volatile, leaving the market outlook unclear. In the short term, the domestic compound fertilizer market is expected to continue consolidating. Next week, domestic compound fertilizer prices are expected to remain largely rangebound, with limited quotation changes. Transactions will still depend on scattered rigid demand, while autumn fertilizer prices are expected to become clearer as more producers issue quotations.

2.4 Melamine Industry

This week, China’s domestic melamine market showed a slowing decline and low-level rangebound consolidation. Posted quotations fluctuated within a narrower range, but actual transaction negotiations remained flexible, and trading activity stayed weak. Supply, demand, and cost factors restrained one another, leaving the market in a weak equilibrium and bottom-building stage, with insufficient momentum for a clear unilateral rise or fall.

On the cost side, upstream urea and liquid ammonia prices remained weak overall, failing to provide effective cost support for melamine.

On the supply side, the melamine market operating rate was 57.65% this week, up 1.70 percentage points from last week. Supply increased during the week as maintenance units in Xinjiang and Shandong resumed production one after another. Overall industry capacity utilization rose, and spot supply in the market was sufficient.

On the demand side, the market remained weak. Northern China has entered the wheat harvest season, and combined with the traditional industry off-season, many small and medium-sized downstream factories have suspended operations for farming activities. Overall downstream operating rates fell to low levels, with existing orders executed only on a demand basis and very limited new procurement.

The urea market has fluctuated amid export-related news, with rapid price swings. This has led to strong wait-and-see sentiment among midstream and downstream buyers, making it difficult for urea to provide effective cost support for melamine.

Overall, the market remains dominated by wait-and-see sentiment. Producers are unwilling to continue lowering prices due to cost-floor considerations, while downstream buyers and traders remain bearish and continue to seek lower prices. The long-short tug-of-war remains stalemated.

In the short term, the market is expected to continue fluctuating within a narrow range at low levels. Posted prices are unlikely to move significantly, and transactions will still rely on negotiated concessions. Whether the market can break the stalemate will mainly depend on changes in upstream urea prices, the extent of concentrated industry maintenance, and the pace of recovery in downstream panel orders during the traditional renovation peak season. If demand continues to show no meaningful improvement, inventory accumulation pressure will continue to limit the room for price rebounds.

2.5 International Market Quotations

China bulk small-granule urea FOB was quoted at USD 440.01-480.01/mt, down USD 115-140/mt. Black Sea small-granule urea FOB was quoted at USD 375.01-415.01/mt, down USD 110/mt. Baltic small-granule urea FOB was quoted at USD 370.01-410.01/mt, down USD 110/mt. Middle East small-granule urea FOB was quoted at USD 425.01-490.01/mt, down USD 110/mt. Brazil small-granule urea CFR was quoted at USD 425.01-490.01/mt, down USD 110/mt. India CFR was quoted at USD 444.91-449.31/mt, with the reported decline at USD 490.1-509.7/mt.

Iran large-granule urea FOB was quoted at USD 370.01-400.01/mt, down USD 80-90/mt. Egypt large-granule urea FOB was quoted at USD 450.01-495.01/mt, down USD 105-110/mt. Brazil large-granule urea CFR was quoted at USD 440.01-475.01/mt, down USD 80-90/mt. Southeast Asia large-granule urea CFR was quoted at USD 485.01-528.01/mt, down USD 105-117/mt. China large-granule urea FOB was quoted at USD 470.01-490.01/mt, down USD 90-135/mt.

3. Market Outlook

Supply: In the short term, urea producer operating loads are expected to remain relatively high. Some units that were previously under maintenance are gradually resuming production, and market supply remains relatively sufficient. However, attention should be paid to whether a new round of seasonal maintenance will be arranged. Overall supply-side flexibility remains limited. Over the next three weeks, five producers are expected to undergo planned maintenance, while seven to eight producers are expected to resume production. In terms of supply trend, planned maintenance is concentrated in the latter part of the period. Daily output is expected to remain high in the short term before declining.

Inventory: Current finished product inventory pressure among producers is objectively present. Slow shipments have kept plant inventories at relatively high levels, and producers continue to face pressure to reduce stocks, with a strong willingness to offer concessions to facilitate shipments. If concentrated agricultural fertilizer demand and export volume growth occur simultaneously, plant inventories may be digested relatively quickly in stages. However, if demand starts later than expected or outbound shipments fall short of expectations, inventory pressure will continue to cap upside room in spot prices.

Demand: Agricultural demand has a clear seasonal rotation window. After the current short gap period, topdressing demand for summer-sown crops in many regions is expected to start gradually, forming a round of rigid, concentrated procurement support and driving a staged increase in spot transactions. However, due to weak planting returns at the grassroots level, farmers remain cautious about input spending, and the likelihood of large-scale advance stocking is low. The sustainability of rigid demand support is therefore limited.

Industrial demand remains weak overall. The compound fertilizer market is in the transition period between the end of summer fertilizer and pre-sales for autumn fertilizer. Operating rates lack upward momentum, and raw material procurement remains restrained. Downstream industries such as melamine continue to be dragged down by weak end-market demand, making it difficult for operating rates to recover significantly. Sustained urea procurement volumes are expected to remain low.