Urea Weekly Review: Cost Support Lifts Sentiment, but Loose Supply and Demand Limit Gains (20260904)

September 7, 2026

FDD-global.com

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Guide

Highlights at a glance

The urea market showcased mixed trends this week, with stable yet rebounding prices supported by firm coal rates and bullish export quota expectations. Domestic supply levels remain ample despite declines in industry operating rates. Weak agricultural demand and modest purchases by compound fertilizer and melamine producers continue exerting downward pressure on sentiment-driven gains. Inventory levels remain high, both at producer facilities and ports, restricting price hikes. International urea prices showed regional variability, with gains in select markets like Black Sea and Baltic FOB. Future outlook hinges on supply-side adjustments, inventory management, downstream purchasing activity, and geopolitical factors impacting global trade.

1. Urea Market Overview

1.1 Feidoodoo Price Index

The domestic urea market stabilized and rebounded this week, fluctuating on a firmer trend. Expectations for further export quotas continued to strengthen, while firm and rising coal prices provided solid cost support for fixed-bed producers. Combined with supportive macro news, these factors improved market confidence, lifted futures prices and improved spot trading sentiment.

On the supply side, industry operating rates declined slightly, but national daily output remained above 190,000 tonnes. Producer inventories were broadly unchanged from the prior week. Demand remained weak, end-user consumption was insufficient, and both producer and social inventories remained difficult to digest. At ports, cargo departures did not accelerate materially, while producers continued to consolidate cargoes at ports, leaving inventories at high levels.

On the demand side, agricultural buying remained sporadic. Downstream compound fertilizer and melamine producers made only rigid-demand replenishment purchases, with no concentrated large-volume restocking. Trading sentiment improved under the influence of market expectations, but this did not create effective incremental demand. Cost support and news-driven sentiment may keep the market relatively firm, but limited domestic-demand follow-through raises doubts over the sustainability of sentiment-driven gains. Failure of demand to match supply could lead to a pullback after prices rise. Attention should focus on coal prices, policy implementation and downstream purchasing.

According to Feidoodoo data, the domestic small-granular urea price index averaged 1,761.18 as of Friday, down 6.73 from the previous week, or down 0.38%.

During the first half of the week, the urea market fluctuated in consolidation. Weak domestic demand did not improve materially: agriculture remained in its off-season, industrial compound fertilizer producers made only rigid-demand purchases, and demand support was insufficient. Although some plants reduced output, supply remained ample and inventory pressure stayed high. New-order sales at some producers were weak, trading was subdued and deadlocked, ex-factory quotations edged lower, and futures also fluctuated in consolidation.

During the second half of the week, the urea market strengthened. Export sentiment and continued coal-price gains lifted urea production costs and provided bottom support to valuations. New-order sales improved at producers in some main regions, trading sentiment warmed, downstream buyers mainly followed rigid demand, and some producers raised quotations slightly with support from pending orders. Futures strengthened alongside spot prices.

1.2 Delivery Area Quotations

Prices in Northeast China were stable at 1,780-1,800 yuan/tonne. Prices in East China rose to 1,710-1,760 yuan/tonne. In Central China, small- and medium-granular urea rose to 1,710-1,900 yuan/tonne, while large-granular urea was stable at 1,800-1,850 yuan/tonne. Prices in North China rose to 1,580-1,800 yuan/tonne. Prices in South China fell to 1,770-1,820 yuan/tonne. Prices in Northwest China were stable at 1,860-1,910 yuan/tonne. Prices in Southwest China were stable at 1,660-2,000 yuan/tonne.

2. Industry Chain Developments

2.1 Daily Output

Output: Domestic urea output was approximately 1.3719mn tonnes this week, down 19,900 tonnes from the previous week, down 1.43% week on week and up 1.68% year on year. Daily output was 196,000 tonnes. Industry daily output stayed below 200,000 tonnes during the week, but supply remained ample. Average daily output was down 2,800 tonnes from the previous week. Output rose notably in Hubei and Shandong, while falling notably in Shaanxi, Henan, Hebei and Anhui.

Operating rate: The domestic urea industry operating rate was approximately 82.14%, down 1.19 percentage points week on week and up 4.04 percentage points year on year. Operating rates increased in Gansu and Jilin and declined in Hebei, Henan, Anhui and Shaanxi.

By product type, large-granular urea output was about 323,300 tonnes, up 16,700 tonnes week on week, or 5.45%, and up 36.76% year on year. Its operating rate was about 93.33%. Small- and medium-granular urea output was about 1.0486mn tonnes, down 36,600 tonnes week on week, or 3.37%, and up 0.58% year on year. Its operating rate was about 79.21%.

By production route, coal-based urea output was about 1.0805mn tonnes, down 20,000 tonnes week on week and up 78,000 tonnes year on year, with an operating rate of about 82.24%. Gas-based urea output was about 291,300 tonnes, unchanged week on week and up 14,800 tonnes year on year, with an operating rate of about 81.73%.

2.2 Market Inventories

Producer: Producer inventories totaled approximately 1.6757mn tonnes, up 4,700 tonnes week on week, or 0.28%, and up 63.66% year on year. Producer inventories returned to a mild accumulation trend. Although the market received temporary support from bullish factors, inadequate end-user consumption continued to constrain shipments. Cargoes remained concentrated at producers, while high port inventories slowed transfers to ports. Inventories increased in Hebei, Heilongjiang, Jiangsu, Inner Mongolia, Qinghai, Sichuan, Xinjiang and Chongqing, and declined in Anhui, Gansu, Hainan, Henan, Hubei, Jiangxi, Shandong, Shanxi, Shaanxi and Yunnan.

Port: Port inventories totaled 1.0350mn tonnes, down 41,600 tonnes week on week, or 3.86%, and up 114.29% year on year. Inventories began to decline narrowly, but remained near saturated levels. Departures included large-granular cargoes from Rizhao, Yantai and Zhenjiang, as well as small-granular cargoes from Huanghua. Arrivals included large-granular cargoes at Jinzhou, Qingdao and Huanghua, and small-granular cargoes at Longkou and Zhenjiang.

Large-granular urea: Large-granular urea port inventories were 440,000 tonnes in China, down 16,600 tonnes week on week. Small-granular urea port inventories were 595,000 tonnes, down 25,000 tonnes week on week.

2.3 Compound Fertilizer Industry

The domestic compound fertilizer market was stable to weaker this week. Some areas appeared stable but adjusted prices lower in practice, while upstream and downstream bargaining remained pronounced and overall trading was subdued. As of Friday, the domestic 45%S price index was 3,389.17 and the 45%CL price index was 2,874.55.

On the cost side, raw material prices were mixed. Urea stabilized and rebounded only modestly, synthetic ammonia remained firm, sulfuric acid was weak, and continued weakness in phosphate fertilizers reduced overall cost support.

On the supply side, the compound fertilizer operating rate was 34.18%, up 0.07 percentage points week on week. Producers adjusted output flexibly around autumn fertilizer orders. Supply remained ample, while factories prioritized delivery of earlier advance orders and room for additional new orders remained limited.

On the demand side, autumn planting fertilizer preparation is advancing, but large-scale grassroots purchasing has not yet begun. Some distributors showed slightly better willingness to lift cargoes, but restocking remained cautious. Low inventories and rapid turnover remained the mainstream model.

Overall, the weak supply-demand tug-of-war pattern in the compound fertilizer market in the short term cannot be reversed quickly. With weakening cost support and terminal demand falling short of expectations, it is expected that the sluggish trend of China's domestic compound fertilizer market will hardly improve in the next cycle. For subsequent market turning points, continuous tracking is required for changes in upstream raw material prices, the pace of concentrated release of autumn fertilizer preparation demand downstream, and external variables brought by overseas geopolitical situations.

2.4 Melamine Industry

The domestic melamine market remained in narrow-range bargaining and fluctuation. Quotations were relatively stable and actual transactions adjusted flexibly. The key contradiction remained raw material cost volatility versus insufficient downstream rigid demand.

On the cost side, the price of upstream urea fluctuated within the week with a limited range of oscillation, failing to provide strong cost support for melamine. The raw material segment lacked sustained upward momentum, and the pulling effect of costs on finished product prices remained weak.

On the supply side, the operating rate of the melamine market stood at 54.14% this week, up by 3.37% from the previous week. The overall operating level of the industry saw limited fluctuations. Enterprises arranged production flexibly according to their own order and inventory conditions, and some local facilities underwent periodic maintenance or resumption adjustments. Factories mainly focused on fulfilling existing orders and destocking inventories. The overall spot supply in the market remained sufficient, while manufacturers held divergent attitudes toward shipments. Some producers adopted price concessions to boost sales, intensifying competition for circulating goods.

On the demand side, most downstream factories maintain a just-in-time purchasing strategy, buying only what they need for immediate use, with no large-scale concentrated restocking activities. Traders are in a strong wait-and-see mood and focus on short-term operations. The volume of new market orders is limited, and transactions are mostly supported by rigid demand orders.

Overall, the current weakly balanced supply and demand pattern in the market is difficult to reverse in the short term. With insufficient cost support and the slow release of downstream demand, the market lacks momentum for an upward breakout. The future market trend requires continuous monitoring of the movement of upstream urea raw materials and the resumption of operating rates in the downstream home panel industry. Attention should also be paid to foreign trade variables brought by overseas geopolitical situations. It is expected that the melamine market will continue to fluctuate and consolidate in the short term.

2.5 International Market Quotations

China bulk small-granular urea FOB was USD 365.01-380.01/tonne, down USD 15/tonne. Black Sea small-granular urea FOB was USD 370.01-400.01/tonne, up USD 20-25/tonne. Baltic small-granular urea FOB was USD 365.01-395.01/tonne, up USD 20-25/tonne. Middle East small-granular urea FOB was USD 405.01-425.01/tonne, up USD 10-15/tonne. Brazil small-granular urea CFR was USD 410.01-420.01/tonne, up USD 5-20/tonne. India CFR was USD 390.01-394.01/tonne, unchanged week on week.

Iran large-granular urea FOB was USD 330.01-335.01/tonne, with the low end up USD 5/tonne and the high end down USD 10/tonne. Egypt large-granular urea FOB to Europe was USD 500.01-505.01/tonne, up USD 10-15/tonne. Brazil large-granular urea CFR was USD 440.01-465.01/tonne, up USD 5-20/tonne. Southeast Asia large-granular urea CFR was USD 432.01-445.01/tonne, with the low end up USD 7/tonne. China large-granular urea FOB was USD 400.01-410.01/tonne, with the low end up USD 5/tonne.

3. Market Outlook

On the supply side, domestic urea supply is expected to remain relatively ample. Earlier maintenance plants will restart, operating rates are expected to return gradually to high levels, and stable release of new capacity should keep daily output elevated. Four plants are expected to undergo maintenance and 7-9 plants are expected to restart over the next three weeks. Daily output may remain temporarily low before rising gradually by mid-month.

On the inventory side, export port consolidation can temporarily divert factory cargoes and slow inventory accumulation, but is unlikely to create a substantial overall destocking. Before concentrated end-user procurement materializes, industry inventories will remain relatively high and continue to constrain spot-price gains.

On the demand side, compound fertilizer producers have not yet entered their production peak, but operating rates are expected to increase visibly in mid- to late September, supporting urea procurement. Agricultural demand remains scattered. India's tender loading date is September 24, and ongoing exports may divert domestic cargoes and create temporary tightness in certain periods, offering short-lived price support.

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