1. Urea Market Overview

1.1 FDD Price Index

This week, China’s domestic urea spot market first stabilized and then followed the upward trend. At the beginning of the week, the market operated weakly. As positive export-related information was gradually released, market sentiment improved, and spot prices first stabilized before following gains. The futures market rebounded notably, further improving spot trading sentiment.

Meanwhile, recent international geopolitical conflicts pushed up the price center of the global fertilizer sector. Strength in external markets was transmitted to the domestic market, while urea futures remained firm. This strengthened guidance for the spot market and further consolidated the confidence of producers and traders in holding prices firm.

On the supply side, enterprise operating rates declined slightly this week, but national daily output remained at a high level above 210,000 tonnes. Enterprise inventories accumulated more than expected this week. Combined with simultaneous weakening of domestic and external demand support, the supply-demand contradiction shifted further toward the production side. Transmission of most cargoes to end users remained blocked. Although some enterprises still had pending orders, spot circulation activity was limited, and inventory pressure remained concentrated at factory warehouses.

On the demand side, the market is in the traditional gap period for agricultural demand, with only scattered topdressing demand in some regions. Industrial downstream sectors such as compound fertilizer and melamine maintained need-based procurement, while willingness for bulk replenishment was insufficient. Traders operated cautiously, generally buying and selling on a back-to-back basis, and the market lacked large-order transactions to drive activity.

Exports remain the key market variable. In the short term, the market expects the profit window to widen further. The landing pace of overseas tenders and international price trends will directly affect the degree of cargo diversion. The overall export boost still needs continued observation.

Overall, the urea market currently lacks sustained and strong demand and export drivers for further upside. At the same time, downside room is constrained by cost support and policy stance, making it difficult for the market to form a clear trend. In the short term, the market is expected to operate in volatile consolidation. Follow-up attention should focus on the pace of autumn fertilizer demand, enterprise inventory digestion, and changes in export policy.

According to FDD data calculations, as of this Friday, the average domestic small-granule urea price index was 1,822.36, down 11.36 from last week, a week-on-week decrease of 0.62%.

In the first half of the week, the urea market fluctuated narrowly with a firm bias. On the spot side, new order transactions at low-end prices increased, and some enterprises raised quotations slightly. However, demand remained weak, and the light trading atmosphere continued to weigh on spot transactions. The futures market was supported by rising international geopolitical tensions, which drove a broader rally in the global fertilizer sector. Together with improved export policy, urea futures gained sentiment support, and the price center moved higher. On the spot side, new orders at low-end prices were relatively good, while the futures market continued to rebound.

In the second half of the week, the urea market continued to operate firmly. On the spot side, export expectations continued to improve market sentiment, while stronger futures performance lifted spot sentiment. Low-priced orders improved in some regions, and some market prices rebounded slightly. On the futures side, continued geopolitical tensions and rising overseas prices were transmitted into market sentiment. In addition, news of new export quotas and rising expectations for an Indian tender in early August gave futures prices a phased rebound driver. However, as fundamentals had not improved materially, profit-taking pressure appeared at higher levels, and the overall market showed a firm but height-limited volatile pattern.

1.2 Delivery Region Quotations

By region, prices in Northeast China were stable at RMB 1,860-1,880/tonne. Prices in East China rose to RMB 1,750-1,800/tonne. Small and medium granule prices in Central China were stable at RMB 1,750-1,900/tonne, while large granule prices rose to RMB 1,790-1,810/tonne. Prices in North China fell to RMB 1,650-1,880/tonne. Prices in South China fell to RMB 1,810-1,900/tonne. Prices in Northwest China were stable at RMB 1,860-1,950/tonne. Prices in Southwest China were stable at RMB 1,680-2,080/tonne.

2. Industry Chain Dynamics

2.1 Daily Output

Output

This week, domestic urea output was approximately 1.488 million tonnes, down 13,700 tonnes from last week, a week-on-week decrease of 0.91% and a year-on-year increase of 8.72%. Daily output was 212,600 tonnes. During the week, industry daily output remained above 210,000 tonnes. Supply continued to fluctuate at high levels, and the market supply side remained ample. Average daily output for the week was 212,600 tonnes, down 1,900 tonnes from last week.

During the cycle, the province with an increase in output month on month was Shandong, while provinces with clear declines in output included Heilongjiang, Hubei, and Xinjiang.

Operating Rate

The domestic urea industry operating rate was approximately 89.09%, down 0.82 percentage points month on month and up 5.50 percentage points year on year. The domestic urea industry operating rate declined during the week but remained higher than the same period last year. During the cycle, Shandong saw an increase in operating rate, while Heilongjiang and Hubei saw declines.

By product type, large-granule urea output was approximately 296,200 tonnes, up 12,900 tonnes from last week, a week-on-week increase of 4.55%; compared with the same period last year, output increased by 39,900 tonnes, a year-on-year increase of 15.57%. The large-granule operating rate was approximately 85.51%, up 3.73 percentage points from last week and up 8.45 percentage points year on year.

Small and medium granule urea output was approximately 1.1918 million tonnes, down 26,600 tonnes from last week, a week-on-week decrease of 2.18%; compared with the same period last year, output increased by 93,400 tonnes, a year-on-year increase of 8.50%. The small and medium granule operating rate was approximately 90.03%, down 2.01 percentage points from last week and up 4.75 percentage points year on year.

By process, coal-based urea output was approximately 1.2219 million tonnes, down 14,500 tonnes from last week and up 159,600 tonnes from the same period last year. The operating rate was approximately 93.00%, down 1.10 percentage points from last week and up 0.54 percentage points year on year.

Gas-based urea output was approximately 266,100 tonnes, up 800 tonnes from last week and down 26,300 tonnes from the same period last year. The operating rate was approximately 74.66%, up 0.22 percentage points from last week and down 1.40 percentage points year on year.

2.2 Market Inventory

Enterprise Inventory

This week, enterprise inventory was approximately 1.5317 million tonnes, up 122,800 tonnes from last week, a week-on-week increase of 8.72%; compared with the same period last year, inventory increased by 564,000 tonnes, a year-on-year increase of 58.28%.

During this cycle, inventories at domestic urea producers continued to accumulate, and the current inventory level is already significantly higher than the same period last year. Export port collection has not yet formed large-scale volume, and external sales have limited ability to divert domestic capacity. Domestic agricultural demand is gradually entering its final stage, while industrial demand recovery remains slow and terminal support is insufficient.

Once domestic demand weakens in phases, upstream factory inventories quickly enter an accumulation channel. In addition, downstream overall consumption capacity is weak, intermediaries have low willingness to stock, and most cargoes face difficulty moving down to terminals. Even though some plants still hold pending orders, actual spot outflow remains insufficient, and large volumes of cargo are concentrated in factory warehouses.

Provinces where enterprise inventory increased: Anhui, Gansu, Henan, Heilongjiang, Hubei, Jiangsu, Inner Mongolia, Ningxia, Shandong, Shanxi, Shaanxi, Sichuan, and Yunnan.

Provinces where enterprise inventory decreased: Hainan, Hebei, Qinghai, Xinjiang, and Chongqing.

Port Inventory

Total port inventory was 156,900 tonnes, down 23,000 tonnes from last week, a week-on-week decrease of 12.78%; compared with the same period last year, inventory decreased by 224,100 tonnes, a year-on-year decrease of 58.82%.

During this cycle, ports saw both cargo collection and departures. Some vessel schedules arrived, and port cargoes showed departures. The main changes were as follows: small-granule cargoes were collected at Longkou Port and Rizhao Port, while large-granule cargoes were collected at Yantai Port and Huanghua Port. Small-granule cargoes departed from Zhenjiang Port, Tianjin Port, and Huanghua Port. Other ports saw no obvious abnormal changes.

Large Granules

This week, domestic large-granule urea port inventory was 110,900 tonnes, up 32,000 tonnes from last week, a week-on-week increase of 40.56%; compared with the same period last year, inventory decreased by 248,100 tonnes. Large-granule urea port inventory increased slightly during the week but remained lower than the same period last year.

Small Granules

This week, domestic small-granule urea port inventory was 46,000 tonnes, down 90,000 tonnes from last week, a week-on-week decrease of 66.18%; compared with the same period last year, inventory decreased by 136,000 tonnes. Small-granule urea port inventory decreased during the week and remained lower than the same period last year.

2.3 Compound Fertilizer Industry

This week, China’s domestic compound fertilizer market generally remained in rangebound stalemate, with structural divergence becoming more pronounced.

As of this Friday, the domestic 45%S price index was 3,400.83, and the 45%CL price index was 2,898.18.

On the cost side, raw material trends were mixed. Phosphate-based raw materials remained firm and provided bottom support, while nitrogen and potash markets operated weakly. Overall cost pressure persisted, and producers were not strongly willing to cut prices to promote sales.

On the supply side, the compound fertilizer market operating rate was 31.30% this week, down 2.11 percentage points from last week. Industry operating rates declined slightly during the week. Affected by limited production profits, the overall industry operating level remained moderate. Enterprises prioritized delivery of previous pre-sale orders, while low-end market supply gradually decreased.

On the demand side, the market is in the transition period between summer and autumn. Autumn fertilizer pre-sales are progressing in an orderly manner, but channel participants remain strongly cautious. Dealers mostly adopt a buy-and-sell, batch-replenishment model. Large-volume stocking is limited, and the market is dominated by scattered rigid-demand transactions. Overall shipment pace is relatively slow, and the tug of war between bullish and bearish factors continues.

Overall, the compound fertilizer market is likely to continue a pattern of stability with fluctuations in the short term, as there is no effective driver for sharp rises or falls. The cost side will continue to limit downside room, but if downstream demand cannot be released in a concentrated way, upward price attempts will face considerable resistance. As time progresses, northern autumn planting fertilizer demand will gradually enter the traditional release window, and the market will continue to focus on channel stocking follow-up. Future market direction will depend both on cost changes caused by fluctuations in upstream raw materials and on terminal acceptance and the pace of concentrated procurement.

2.4 Melamine Industry

This week, China’s domestic melamine market generally maintained weak, volatile operation, with the tug of war between bullish and bearish factors continuing.

On the cost side, raw material urea prices fluctuated weakly, and cost support loosened somewhat, weakening producers’ confidence in actively holding prices firm.

On the supply side, the melamine market operating rate was 52.07% this week, down 6.43 percentage points from last week. Overall supply remained relatively sufficient. Industry operating levels were relatively stable, with no large-scale concentrated maintenance or production reduction plans. Spot supply in the market was ample, and enterprise inventory digestion was slow.

On the demand side, performance was muted due to the high-temperature off-season. Downstream sectors such as panels, impregnated paper, and adhesives had limited operating rates, terminal order growth was insufficient, and downstream plants generally followed a just-in-time procurement strategy. Willingness for concentrated replenishment was weak, traders operated cautiously, and the market was mostly dominated by small rigid-demand orders, lacking support from bulk procurement. Wait-and-see sentiment remained strong, supply and demand failed to form effective linkage, and resistance to upward price breakthroughs was high.

Overall, the melamine market is likely to continue low-level narrow-range fluctuations in the short term. A sharp rise lacks strong drivers, while deep downside room is also limited. Market direction will still depend on raw material urea fluctuations and downstream demand changes. If raw materials continue to weaken and downstream demand does not improve, the market will remain under pressure. Follow-up attention should focus on upstream raw material price adjustments, plant maintenance developments in the industry, and downstream stocking rhythm before the traditional demand peak season arrives.

2.5 International Market Quotations

China: bulk small-granule FOB prices were USD 400.01-420.01/tonne, up USD 20-28/tonne.

Black Sea: small-granule port FOB prices were USD 375.01-415.01/tonne, up USD 10-40/tonne.

Baltic Sea: small-granule port FOB prices were USD 370.01-410.01/tonne, up USD 10-25/tonne.

Middle East: small-granule port FOB prices were USD 410.01-450.01/tonne, up USD 25/tonne.

Brazil: small-granule CFR prices were USD 435.01-455.01/tonne, up USD 25-35/tonne.

India: CFR prices were USD 444.91-449.31/tonne, flat from last week.

Iran: large-granule port FOB prices were USD 350.01-355.01/tonne, up USD 4-5/tonne.

Egypt Europe: large-granule port FOB prices were USD 530.01-555.01/tonne, up USD 28-40/tonne.

Brazil: large-granule CFR prices were USD 455.01-480.01/tonne, up USD 30-35/tonne.

Southeast Asia: large-granule port CFR prices were USD 460.01-475.01/tonne, up USD 40/tonne.

China: large-granule port FOB prices were USD 420.01-440.01/tonne, up USD 20-25/tonne.

3. Market Outlook

Supply: The high and loose supply pattern continues, with limited contraction. At this stage, overall operating rates at domestic urea enterprises remain high. There are few units under maintenance, while resumed production and new capacity are being released in an orderly manner. Overall market supply is very ample. Over the next three weeks, 1-2 enterprises are expected to conduct planned maintenance, while 8-9 enterprises are expected to resume production. In terms of supply trend, there are still not many enterprises with confirmed maintenance plans in the future. Considering short-term faults, daily output is likely to fluctuate at high levels, and sufficient supply will continue.

Inventory: Inventory accumulation pressure is prominent, and destocking remains slow. Current inventory digestion at producers is relatively slow. Before demand shows clear improvement, factory inventories may continue to accumulate, creating persistent pressure on market prices. Traders remain cautious and are generally unwilling to stock heavily. Social circulation inventories remain low, while inventory pressure is mainly concentrated at the production end. Enterprise shipment pace will continue to affect quotation strategies.

Demand: Agricultural demand still has phased topdressing and replenishment needs, but overall procurement strength is unlikely to expand continuously. Buyers are mainly expected to follow up at low prices and replenish based on demand. On the industrial side, downstream operating rates in compound fertilizer and melamine are constrained by profitability. Raw material procurement sentiment remains cautious, and acceptance of high-priced cargoes is limited. On the export side, under the combined influence of international supply-demand patterns and domestic policy guidance, export growth space is expected to be limited and is unlikely to form effective diversion for the domestic market.