Urea Weekly: Prominent Supply-Demand Contradictions Drag the Market Lower in Volatile Trading (20260814)

01 Market Overview

1.1 Feidoodoo Price Index

Domestic urea spot prices showed a volatile weak trend this week. At the beginning of the week, the market extended its previous weakness. Severe supply-demand contradictions and a lack of positive support kept market sentiment stalemated and weak. Midweek, as market prices moved lower and low-end quotations touched the industry cost line, order intake for low-priced cargoes improved slightly. Some enterprises attempted small quotation increases to test the market, but downstream procurement willingness remained weak, transaction volume growth fell short of expectations, and the market quickly fell into a trading deadlock. The futures market generally weakened in line with the spot market, with the price center continuing to move lower and maintaining a volatile downward trend throughout the week, showing clear futures-spot linkage. On the supply side, enterprise operating rates slipped slightly this week, but national daily output remained above the high level of 200,000 tonnes. Enterprise inventories accumulated slightly this week, with the inventory-building pace slowing, broadly in line with expectations. Port inventories increased more than expected, mainly because of imported cargo warehousing, weak domestic demand, and export-related pressure relief, which led to higher port collection. On the demand side, agricultural fertilizer use has entered the traditional gap period. Field topdressing is basically ending, with only scattered restocking demand for some cash crops. Downstream industrial users such as compound fertilizer and melamine enterprises maintained relatively low operating rates, raw material inventories still had remaining balances, and procurement was limited to rigid-demand replenishment. There was no concentrated large-volume restocking. Downstream sectors such as boards and denitration only provided basic stable demand and could not form effective incremental support. Overall, against the backdrop of prominent supply-demand contradictions, the market is still unlikely to stabilize in the short term and is expected to continue operating weakly near the bottom range. Follow-up attention should focus on export fulfillment pace, recovery progress in compound fertilizer operating rates, and further policy developments to capture staged turning-point signals.

According to Feidoodoo data calculations: as of this Friday, the average domestic small-granule urea price index was 1784.64, down 16.91 from last week, or -0.94% week on week.

In the first half of the week, the urea market operated weakly. India’s tender was launched, export quotas were issued, and policy signals for price stabilization were frequent, but market trading remained stalemated, and some enterprises slightly lowered quotations to promote transactions. On the futures side, the previous rebound had already partly digested these positives. The market found it difficult to price in higher optimism in the short term and weakened ahead of time. The core off-season contradiction of strong supply and weak demand remained unchanged. Although price-stabilization policy provided some bottom support, substantive positives were still unclear and insufficient to effectively drive prices upward. Real delivery pressure near the main contract’s delivery period dominated market movement.

In the second half of the week, the urea market continued weak fluctuations. On the spot side, some enterprises with low-end quotations saw acceptable new order transactions and slightly raised ex-factory quotations with support from pending orders. However, market wait-and-see sentiment remained strong, downstream follow-up was weak, and acceptance of high-priced cargoes was limited. On the futures side, prices generally weakened in line with the spot market, the board’s price center continued to move lower, and the market maintained a volatile downward trend throughout the period, with clear futures-spot linkage.

1.2 Delivery Region Quotations

Specifically, prices in Northeast China fell to 1780-1800 yuan/tonne. Prices in East China fell to 1680-1730 yuan/tonne. Prices for small and medium granules in Central China fell to 1690-1900 yuan/tonne, while large granule prices remained stable at 1800-1830 yuan/tonne. Prices in North China fell to 1570-1800 yuan/tonne. Prices in South China fell to 1810-1850 yuan/tonne. Prices in Northwest China remained stable at 1860-1910 yuan/tonne. Prices in Southwest China fell to 1680-2000 yuan/tonne.

02 Industry Chain Developments

2.1 Daily Production

Output: This week, domestic urea output was about 1.4392 million tonnes, down 47,100 tonnes from last week, or -3.17% week on week, and up 8.33% year on year. Daily output was 205,600 tonnes. Industry daily output stayed above 200,000 tonnes during the week, supply remained at a high level, and the market supply side stayed loose. Average daily output was 205,600 tonnes, down 6,700 tonnes from last week. During the cycle, provinces with obvious increases in output were Heilongjiang and Hubei, while provinces with obvious decreases were Shanxi and Inner Mongolia.

Operating rate: The domestic urea industry operating rate was about 86.17%, down 2.82 percentage points week on week and up 2.95 percentage points year on year. The weekly operating rate fell but remained above the same period last year. During the cycle, Heilongjiang saw a clear rise in operating rates, while Jilin, Jiangxi, Shaanxi, and Jiangsu saw clear declines.

By product type, large-granule urea output was about 297,600 tonnes, down 3,900 tonnes from last week, or -1.29% week on week, and up 55,400 tonnes year on year, or +22.87%. The large-granule operating rate was about 86.24%, down 0.80 percentage points from last week and up 13.42 percentage points year on year. Small and medium granule urea output was about 1.1416 million tonnes, down 43,200 tonnes from last week, or -3.65% week on week, and up 35,200 tonnes year on year, or +3.18%. The small and medium granule operating rate was about 85.91%, down 3.59 percentage points from last week and up 0.01 percentage points year on year.

By process, coal-based urea output was about 1.1713 million tonnes, down 48,900 tonnes from last week and up 112,300 tonnes year on year. Its operating rate was about 89.15%, down 3.72 percentage points from last week and up 5.49 percentage points year on year. Gas-based urea output was about 267,900 tonnes, up 1,800 tonnes from last week and down 21,700 tonnes year on year. Its operating rate was about 75.17%, up 0.51 percentage points from last week and down 1.36 percentage points year on year.

2.2 Market Inventory

Enterprise inventory: This week, enterprise inventory was about 1.6886 million tonnes, up 22,500 tonnes from last week, or +1.35% week on week, and up 771,300 tonnes year on year, or +84.08%. The inventory-building trend at domestic urea producers slowed clearly during the cycle. Local equipment failures and maintenance increased in some regions this cycle. Although downstream consumption capacity showed no obvious improvement, overall market supply declined slightly. With export shipments being advanced successively, the accumulation trend at producers gradually slowed. Considering that staged positive support remains insufficient, destocking resistance still exists. Provinces with inventory increases included Anhui, Hainan, Hebei, Henan, Jiangsu, Qinghai, Shandong, Shanxi, Shaanxi, and Xinjiang. Provinces with inventory decreases included Gansu, Heilongjiang, Hubei, Jiangxi, Sichuan, and Chongqing.

Port inventory: Port inventory totaled 714,300 tonnes, up 405,400 tonnes from last week, or +131.24% week on week, and up 173,300 tonnes year on year, or +32.03%. During the cycle, port collection accelerated significantly. On one hand, domestic demand consumption was insufficient, and upstream producers relied on export shipments to relieve factory inventory pressure. On the other hand, a new round of India’s tender arrived, rapidly boosting participants’ enthusiasm for port collection. As the pace accelerated, most port inventories increased. The main changes were large-granule cargo collection at Qingdao Port, Rizhao Port, Tianjin Port, Yantai Port, and Huanghua Port, as well as small-granule cargo collection at Lianyungang, Longkou Port, Tianjin Port, and Huanghua Port. A few ports saw scattered departures. Other ports showed no obvious changes.

Large granules: This week, domestic large-granule urea port inventory was 360,900 tonnes, up 173,000 tonnes from last week, or +92.07% week on week, and up 90,900 tonnes year on year. Large-granule urea port volume increased sharply during the week and was above the same period last year.

Small granules: This week, domestic small-granule urea port inventory was 353,400 tonnes, up 232,400 tonnes from last week, or +192.07% week on week, and up 140,400 tonnes year on year. Small-granule urea port inventory increased sharply during the week and was above the same period last year.

2.3 Compound Fertilizer Industry

The domestic compound fertilizer market overall maintained weak operation this week. Market sentiment was stalemated and quiet, showing the feature of overt stability with hidden adjustments.

As of this Friday, the domestic 45%S price index was 3398.33, and the 45%CL price index was 2890.91.

On the cost side, trends were mixed. Phosphate fertilizer prices remained firm under international sulfur geopolitical disruptions and rigid demand from high-phosphate autumn fertilizer formulas, forming bottom support for compound fertilizer costs. Nitrogen fertilizer supply was loose and prices continued to operate weakly, slightly offsetting phosphate fertilizer cost pressure. In the potash market, multi-channel supply bargaining continued and prices fluctuated narrowly, offering limited pull on compound fertilizer costs. On the supply side, the compound fertilizer market operating rate was 29.97% this week, down 1.40 percentage points from last week, with a slight weekly decline. Industry production maintained a flexible production-control model. Mainstream large producers relied on earlier autumn fertilizer presale orders to maintain basic production, while small and medium producers flexibly adjusted unit loads according to demand. Overall operating rates were in a medium-to-low range. Finished-product inventories continued to accumulate slightly, and shipment pressure gradually emerged. On the demand side, domestic field crop autumn sowing fertilizer preparation has not yet entered a stage of concentrated release. Dealers in the Huang-Huai-Hai region and North China wheat-producing areas are cautious, generally adopting low-inventory and purchase-as-needed strategies. Willingness for large-scale early stockpiling is weak. Grassroots farmers are affected by planting returns and have limited acceptance of current fertilizer prices. Only scattered restocking demand exists for southern cash crops, making it difficult to drive an overall market recovery. Overall, the market continues weak sideways consolidation, with limited room for large price rises or falls. On one hand, rigid phosphate fertilizer costs continue to provide bottom support, and producers have no incentive to actively cut prices for volume. On the other hand, terminal demand has not materially expanded, channel pressure for lower prices persists, and the market is expected to maintain firm list prices with flexible concessions in actual transactions. Follow-up attention should focus on upstream raw material trends, the real start pace of autumn fertilizer preparation, export market moves, and the impact of policies related to supply assurance and price stabilization.

2.4 Melamine Industry

The domestic melamine market overall showed a high-level pullback and weakening fluctuation pattern this week. Supply-demand contradictions continued to stand out, market trading remained quiet, and transactions were mainly scattered rigid-demand orders, with bulk large orders scarce. upstream urea generally maintained a loose and weak trend, raw material cost support continued to weaken, and industry On the cost side, production cost pressure was significantly eased, allowing some producers’ profit margins to recover slightly. However, internal oversupply in the industry offset the cost benefit. Cost declines did not drive a market recovery, but instead gave downstream buyers more confidence to keep pressing prices. On the supply side, the melamine market operating rate was 57.14% this week, up 2.89 percentage points from last week. Industry units adjusted operations flexibly. Some regional units conducted staged maintenance and load reduction, but previously restarted units continued to release supply, keeping overall circulating supply ample. Producers gradually fulfilled earlier pending orders, finished-product inventories at plants accumulated slowly, and destocking pressure gradually emerged. On the demand side, downstream board, impregnated paper, and molding compound industries are in the traditional off-season. End-use orders from real estate and home decoration lack incremental growth, and downstream processing plants are operating at low rates. Downstream enterprises are generally digesting earlier raw material inventories, with procurement mainly based on purchase-as-needed. There is no early concentrated stockpiling, and only small rigid-demand replenishment supports the market. Traders face relatively high working-capital pressure, avoid high-priced inventory risk, and maintain strong wait-and-see sentiment, making it difficult to boost transaction volume. Overall, the market continues weak narrow fluctuations. Downside room is limited, while the conditions for a sharp rebound are not yet present. On one hand, raw material urea continues to operate at low levels, the cost side provides no bottom support, and factory inventory accumulation creates loosening pressure. On the other hand, current prices have fallen to a relatively low level for the year, enterprise loss risks have increased, and willingness to actively cut prices sharply is limited. Producers may buffer the decline through production control and shipment limits. Follow-up attention should focus on upstream raw material price changes and melamine unit operating rates.

2.5 International Market Quotations

China bulk small-granule FOB prices were 365.01-385.01 USD/tonne, down 25-30 USD/tonne. Black Sea small-granule port FOB prices were 360.01-380.01 USD/tonne, down 30 USD/tonne. Baltic small-granule port FOB prices were 355.01-375.01 USD/tonne, down 30 USD/tonne. Middle East small-granule port FOB prices were 370.01-380.01 USD/tonne, down 25-45 USD/tonne. Brazil small-granule CFR prices were 390.01-420.01 USD/tonne, down 30-35 USD/tonne. India CFR prices were 390.01-394.01 USD/tonne, down 54.9-55.3 USD/tonne.

Iran large-granule port FOB prices were 345.01-360.01 USD/tonne, down 12-15 USD/tonne. Egypt Europe large-granule port FOB prices were 420.01-460.01 USD/tonne, down 45-50 USD/tonne. Brazil large-granule CFR prices were 400.01-430.01 USD/tonne, down 30-40 USD/tonne. Southeast Asia large-granule port CFR prices were 415.01-435.01 USD/tonne, down 35 USD/tonne. China large-granule port FOB prices were 380.01-400.01 USD/tonne, down 20-25 USD/tonne.

03 Market Outlook

Supply: In the short term, overall industry supply will maintain a loose tone. Most existing units are operating steadily, the number of staged maintenance units is limited, previously shut maintenance capacity is restarting successively, overall industry output remains high, and with new capacity continuing to come online, incremental market supply is sufficient. Over the next three weeks, 4 enterprises are expected to conduct maintenance, while 5-6 enterprises are expected to restart. In terms of supply trend, daily output is temporarily low, but is expected to return to around 210,000 tonnes in early to mid-September, leaving supply still relatively sufficient.

Inventory: In the short term, factory inventories remain in a relatively high range. Although the inventory-building pace has slowed, overall destocking resistance is significant. Upstream cargo flow to downstream channels remains blocked, and inventory pressure continues to restrain upside room in spot prices. Port inventories are gradually increasing with export cargo collection, which can divert part of factory inventories, but external sales volume is insufficient to offset inventory pressure caused by continued production.

Demand: The market is currently in the off-season for field crop fertilizer use. National field topdressing is basically ending, with only scattered supplementary fertilizer demand for some cash crops. There is no large-scale concentrated fertilizer demand to support the market. Downstream compound fertilizer and melamine industries are currently operating at low rates, raw material inventories still have remaining balances, and procurement is limited to rigid-demand replenishment, with no concentrated large-volume purchases. As autumn fertilizer production approaches, compound fertilizer enterprises will gradually raise operating rates and continue increasing urea raw material procurement, becoming the core positive factor on the industrial demand side.