September 10 Urea Daily Review: Weak Fundamentals Cap Price Gains as Downstream Buyers Remain Cautious

Domestic Urea Price Index:

According to Feidoodoo data, the small-granule urea price index stood at 1,805.00 on September 10, down 3.18 from the previous working day, representing a month-on-month decline of 0.18% and a year-on-year increase of 4.53%.

Urea Futures Market:

The UR2701 urea contract opened at 1,810 today, reached a high of 1,814 and a low of 1,794, and settled and closed at 1,804. The closing price was down 3 from the previous trading day's settlement, a decrease of 0.17%. The Shandong basis for the January contract was -24. Open interest in the January contract changed by -3,137 lots today, bringing total open interest to 265,144 lots.

The urea futures market traded in a weak and fluctuating pattern today. The transmission of market fundamentals was the main factor driving futures lower. Spot prices continued to decline, intermediaries in the distribution sector made passive concessions to accelerate inventory reductions, and downstream plants and traders slowed their restocking. Enquiries were limited and actual transactions were insufficient. Weakness in the spot market continued to spill over into the futures market, restricting the scope for an upward rebound. On the supply side, production units that underwent concentrated maintenance earlier are gradually resuming operations, strengthening expectations of a recovery in industry output. Expectations of marginally looser supply continue to weigh on the market. However, relatively firm thermal-coal prices continue to support the lower end of coal-based urea production costs, temporarily limiting the scope for a sharp decline in futures prices. On the demand side, no effective incremental driver has emerged. Large-scale agricultural stockpiling for autumn fertilizer demand has yet to begin, while downstream industrial buyers continue to replenish inventories only as needed. Expectations for a demand-side boost continue to weaken. On the export side, earlier positive factors have gradually been priced in, reducing their marginal support for the market. Overall, urea futures are expected to remain range-bound in the short term. Upside potential will depend on the extent of cost increases and the strength of demand follow-through, while the downside is supported by the policy stance. Attention should be paid to the pace at which reserve purchases enter the market, the pace of export shipments through ports and marginal changes in industry inventories.

Spot Market Analysis:

The domestic urea spot market was stable to weak today. Trading activity remained subdued and follow-through on new orders was average. Following the previous rapid price increase, the market showed insufficient acceptance of high prices. Quotations in major regions were generally stable with slight declines, while traders became more cautious. Transactions mainly consisted of small rigid-demand orders, and the circulation of high-priced cargoes was obstructed. From the perspective of supply and demand fundamentals, market supply remains relatively ample. The previous inventory reduction has already been reflected in prices, while downstream purchasing slowed after prices rose. Agricultural demand is currently in an intermittent period, and industrial users are maintaining low-inventory strategies, resulting in limited actual consumption and a lack of strong demand-side support. At present, market pricing is being influenced more by sentiment and external news. Repeated export-related rumours have disrupted market expectations, slightly strengthening bullish sentiment and prompting some traders to restock moderately. Overall, the market is expected to remain within a narrow consolidation range in the short term. Its direction will depend on the subsequent recovery in demand and the implementation of relevant market developments.

Overall, the domestic urea spot market is currently stable to firm. On the supply side, the industry's operating load remains high and overall market availability is ample. Producers have accelerated inventory reductions, although the sustainability of this trend remains uncertain. Concentrated plant maintenance has caused daily output to edge down from previous highs. Together with the diversion of some domestic cargoes to ports, this has moderately eased short-term supply pressure. On the demand side, compound fertilizer producers and other downstream industries remain constrained by high finished-product inventories. Operating rates remain low, and procurement is mainly limited to small rigid-demand orders. Overall purchasing volumes are limited and provide insufficient substantive support to the market. Current fundamentals remain caught between bullish expectations and bearish realities. Upward momentum mainly comes from higher valuations caused by stronger coal prices on the cost side and improved sentiment amid continued export-related developments. A substantive reversal of the loose supply-demand balance, however, will require clearer changes in market fundamentals. Future attention should focus on the implementation pace of export policies, the extent to which maintenance-related output reductions materialize, and marginal changes arising from the start of autumn fertilizer stockpiling.

By region, prices in Northeast China remained stable at 1,790-1,810 yuan/tonne. Prices in East China declined to 1,760-1,810 yuan/tonne. Prices in Central China remained stable at 1,770-1,920 yuan/tonne. Prices in North China remained stable at 1,620-1,890 yuan/tonne. Prices in South China remained stable at 1,800-1,860 yuan/tonne. Prices in Northwest China remained stable at 1,860-1,910 yuan/tonne. Prices in Southwest China declined to 1,660-1,900 yuan/tonne.

Market Updates:

September 10: The reference delivered price for urea in Guangzhou, Guangdong, was 1,840-1,860 yuan/tonne, with the low end down from the previous working day.

September 10: The reference delivered price for urea in Nanning, Guangxi, was 1,800-1,810 yuan/tonne, unchanged from the previous working day.

September 10: The reference delivered price for urea in Shijiazhuang, Hebei, was 1,780-1,900 yuan/tonne, broadly unchanged from the previous working day.

September 10: The reference delivered price for urea in Wen'an, Hebei, was 1,780-1,850 yuan/tonne, broadly unchanged from the previous working day.

September 10: Mainstream reference prices in Shangqiu were 1,770-1,830 yuan/tonne for small- and medium-granule urea and approximately 1,880-1,900 yuan/tonne for large-granule urea.

September 10: Mainstream reference prices for small- and medium-granule urea in Jingmen were 1,790-1,800 yuan/tonne. Temporary self-pickup prices at the railway platform were approximately 1,740-1,750 yuan/tonne, while mainstream self-pickup prices for large-granule urea were 1,880-1,920 yuan/tonne.

September 10: Reference ex-warehouse/truck-pickup prices in Tieling, Liaoning, were 1,790-1,810 yuan/tonne, unchanged from the previous working day.

September 10: The reference delivered price for urea in Heze, Shandong, was approximately 1,770-1,790 yuan/tonne, down 10 yuan/tonne from the previous working day.

September 10: The reference delivered price for urea in Linyi, Shandong, was 1,760-1,790 yuan/tonne, down 20 yuan/tonne from the previous working day.

September 10: Mainstream reference prices in Xianyang were 1,800-1,820 yuan/tonne, unchanged from the previous working day.