Urea Weekly: Urea Falls First Then Rises amid a Tug-of-War between Policy Support and Fundamental Improvement (20260807)

01 Market Overview

1.1 Feidoodoo Price Index

Domestic urea spot prices moved lower first and then rebounded this week, showing a volatile upward trend. At the beginning of the week, the market extended its previous weakness. After short-term export-positive expectations had been priced in, the main futures contract once plunged sharply, and market sentiment remained weak and stalemated. Midweek became the turning point. A symposium of key urea producers released a clear policy signal of price stabilization and downside support, conveying a systematic policy intention to the market, from the reality of cost inversion and expectations for export adjustment, to self-disciplined production control and the idea of advancing reserve procurement. The futures market rebounded sharply first, sentiment quickly transmitted to the spot market, and spot trading warmed simultaneously. Prices in major producing regions stopped falling and stabilized, with some areas posting slight increases. On the supply side, enterprise operating rates slipped slightly this week, but national daily output remained above the high level of 210,000 tonnes. Enterprise inventories continued to build this week, although the overall increase slowed. During the cycle, policy positives boosted market sentiment, local spot trading improved, and with some units shut down for maintenance, the increase in enterprise inventories narrowed, broadly in line with expectations. On the demand side, agricultural procurement was mainly based on rigid demand, with only scattered topdressing demand in some regions. Industrial downstream sectors such as compound fertilizer and melamine maintained rigid-demand procurement, with limited willingness for bulk restocking. Traders remained cautious, and acceptance of higher-priced raw materials still needs to be tested. Overall, this week’s stabilization mainly relied on sentiment repair and valuation recovery driven by policy expectations, rather than a substantive improvement in supply-demand fundamentals. Therefore, both the sustainability and upside of the rebound are constrained, and the market’s operating center remains relatively weak. Follow-up attention should focus on the pace of autumn fertilizer demand, the result of India’s tender, and how policy measures are implemented.

According to Feidoodoo data calculations: as of this Friday, the average domestic small-granule urea price index was 1801.55, down 17.73 from last week, or -0.97% week on week.

In the first half of the week, the urea market operated weakly. As the second batch of export quotas was lower than market expectations and offered limited immediate improvement to market contradictions, new spot orders at enterprises were average, market trading sentiment was poor, and some enterprises slightly lowered quotations to promote transactions. On the futures side, the previous rebound had already partly digested this positive factor. After expectations were realized, the market traded the logic of “positive news exhausted.” In addition, international prices came under pressure and fell back, while expectations of shrinking export margins formed certain pressure. With domestic positives exhausted and off-season demand weak, real delivery pressure near the main contract’s delivery period dominated market movement.

In the second half of the week, the urea market stabilized with a firm bias after a sharp rebound. On the spot side, supported by policy price-stabilization signals, trading sentiment improved, new orders increased, and some enterprises slightly raised ex-factory quotations with support from pending orders. On the futures side, sentiment was strongly supported by price-stabilization policy and expectations for India’s urea tender. However, as speculative sentiment was gradually released, market heat cooled somewhat, the focus returned to fundamentals, and with nearby contracts approaching delivery, funds had limited willingness to chase higher. The room for further trading was constrained, and subsequent movement still needs confirmation from improvement in the spot market.

1.2 Delivery Region Quotations

Specifically, prices in Northeast China fell to 1830-1860 yuan/tonne. Prices in East China fell to 1720-1780 yuan/tonne. Prices for small and medium granules in Central China fell to 1730-1900 yuan/tonne, while large granules rose to 1800-1830 yuan/tonne. Prices in North China fell to 1610-1860 yuan/tonne. Prices in South China rose to 1830-1870 yuan/tonne. Prices in Northwest China fell to 1860-1910 yuan/tonne. Prices in Southwest China remained stable at 1680-2080 yuan/tonne.

02 Industry Chain Developments

2.1 Daily Production

Output: This week, domestic urea output was about 1.4863 million tonnes, down 21,600 tonnes from last week, or -1.43% week on week, and up 9.71% year on year. Daily output was 212,300 tonnes. Industry daily output stayed above 210,000 tonnes during the week, supply remained at a high level, and the market supply side stayed loose. Average daily output was 212,300 tonnes, down 3,100 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 88.99%, down 1.29 percentage points week on week and up 7.01 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 Shanxi and Inner Mongolia saw clear declines.

By product type, large-granule urea output was about 301,500 tonnes, down 2,900 tonnes from last week, or -0.95% week on week, and up 36,800 tonnes year on year, or +13.90%. The large-granule operating rate was about 87.04%, down 0.84 percentage points from last week and up 7.45 percentage points year on year. Small and medium granule urea output was about 1.1848 million tonnes, down 18,700 tonnes from last week, or -1.55% week on week, and up 121,000 tonnes year on year, or +11.37%. The small and medium granule operating rate was about 89.50%, down 1.41 percentage points from last week and up 6.91 percentage points year on year.

By process, coal-based urea output was about 1.2202 million tonnes, down 21,600 tonnes from last week and up 184,200 tonnes year on year. Its operating rate was about 92.87%, down 1.64 percentage points from last week and up 8.48 percentage points year on year. Gas-based urea output was about 266,100 tonnes, unchanged from last week and down 26,400 tonnes year on year. Its operating rate was about 74.66%, unchanged from last week and down 6.37 percentage points year on year.

2.3 Market Inventory

Enterprise inventory: This week, enterprise inventory was about 1.6661 million tonnes, up 47,500 tonnes from last week, or +2.93% week on week, and up 807,300 tonnes year on year, or +94.00%. The accumulation trend at domestic urea producers slowed during the cycle, mainly because policy positives were released frequently and export expectations turned positive. Factories advanced export-related processes in an orderly manner, and some units in major inventory-building regions shut down, so the overall increase in inventory narrowed. However, current staged positives have only improved local cargo circulation, and market cargo flows and news developments still need to be observed. Provinces with inventory increases included Anhui, Gansu, Hainan, Henan, Hubei, Jiangxi, Inner Mongolia, Ningxia, Qinghai, Shandong, Shaanxi, and Sichuan. Provinces with inventory decreases included Hebei, Heilongjiang, Jiangsu, Shanxi, Xinjiang, and Chongqing.

Port inventory: Port inventory totaled 308,900 tonnes, up 111,500 tonnes from last week, or +56.48% week on week, and down 180,100 tonnes year on year, or -36.83%. During the cycle, port collection accelerated and most port inventories increased. The main changes were large-granule cargoes at Tianjin Port, Yantai Port, and Huanghua Port, and small-granule cargoes at Rizhao Port, Longkou Port, Tianjin Port, Huanghua Port, and Zhenjiang Port. Other ports showed no obvious changes.

Large granules: This week, domestic large-granule urea port inventory was 187,900 tonnes, up 69,000 tonnes from last week, or +58.03% week on week, and down 112,100 tonnes year on year. Large-granule urea port volume rose slightly during the week and remained below the same period last year.

Small granules: This week, domestic small-granule urea port inventory was 121,000 tonnes, up 42,500 tonnes from last week, or +54.14% week on week, and down 72,000 tonnes year on year. Small-granule urea port inventory increased during the week and remained below the same period last year.

2.4 Compound Fertilizer Industry

The domestic compound fertilizer market mostly maintained range-bound fluctuations this week. Mainstream enterprise quotations stayed relatively stable, and the market showed the feature of overt stability with hidden adjustments.

As of this Friday, the domestic 45%S price index was 3400.83, and the 45%CL price index was 2898.18.

On the cost side, trends were mixed. Phosphate raw materials remained firm and provided bottom support, while nitrogen and potash markets operated weakly. The cost side provided bottom support, but raw material fluctuations also increased uncertainty in enterprise pricing. On the supply side, the compound fertilizer market operating rate was 31.37% this week, down 0.64 percentage points from last week, with a slight weekly decline. Enterprises flexibly adjusted unit loads according to orders. Overall supply was sufficient, some enterprises still faced finished-product inventory pressure, and production mainly focused on digesting previous presale orders. On the demand side, autumn fertilizer preparation has gradually started, but the channel side remains strongly wait-and-see. Dealers mostly adopt locked-order delayed-delivery and purchase-as-needed models. Large-scale concentrated stockpiling has not yet arrived, regional performance is differentiated, new order release is limited, and downstream buyers remain cautious. Overall, costs provide some support to compound fertilizer prices, but if terminal demand remains slow to expand, upward momentum will still be insufficient. The short-term market may continue to consolidate, with transactions more dependent on actual fertilizer preparation progress. Follow-up attention should focus on upstream raw material trends, the actual start of autumn fertilizer preparation, export market moves, and the impact of policies related to supply assurance and price stabilization.

2.5 Melamine Industry

The domestic melamine market rose in the early stage this week before upward momentum gradually slowed, shifting from rapid gains to high-level fluctuations. On the cost side, fluctuations in upstream urea prices created variable cost support for melamine and to some extent restrained further upside. Market trading cooled, traders became more wait-and-see, transactions were mostly small rigid-demand orders, signs of stalled rises appeared, and high-level bargaining intensified. On the supply side, the melamine operating rate was 54.25% this week, down 5.03 percentage points from last week. Some production units underwent maintenance or load reduction, circulating supply contracted, factory inventory pressure was limited, manufacturers maintained price-support sentiment, and some enterprises continued to raise quotations. However, as prices moved higher, resistance to further increases gradually emerged. On the demand side, domestic board and impregnated paper downstream sectors remain in the traditional off-season, terminal finished-product orders are limited, downstream plants mostly purchase as needed, and caution toward high-priced raw materials has increased. Large-scale restocking has not appeared. On exports, overseas orders provide some support to the domestic market, but they are not enough to continuously expand overall demand. Overall, the short-term melamine market may mainly fluctuate at a high level, with insufficient momentum for another sharp unilateral rise. The market will depend more on the rhythm of supply-demand bargaining. On the supply side, attention should focus on the restart progress of maintenance units and new maintenance plans, as operating changes will directly affect spot supply.

2.6 International Market Quotations

China bulk small-granule FOB prices were 395.01-410.01 USD/tonne, down 25-30 USD/tonne. Black Sea small-granule port FOB prices were 390.01-410.01 USD/tonne, with the high end down 10 USD/tonne. Baltic small-granule port FOB prices were 385.01-405.01 USD/tonne, down 5-10 USD/tonne. Middle East small-granule port FOB prices were 390.01-425.01 USD/tonne, down 25-40 USD/tonne. Brazil small-granule CFR prices were 425.01-450.01 USD/tonne, down 10-15 USD/tonne. India CFR prices were 444.91-449.31 USD/tonne, unchanged from last week.

Iran large-granule port FOB prices were 360.01-372.01 USD/tonne, up 7-10 USD/tonne. Egypt Europe large-granule port FOB prices were 470.01-505.01 USD/tonne, down 25-30 USD/tonne. Brazil large-granule CFR prices were 430.01-470.01 USD/tonne, up 25-35 USD/tonne. Southeast Asia large-granule port CFR prices were 450.01-470.01 USD/tonne, down 15-20 USD/tonne. China large-granule port FOB prices were 400.01-425.01 USD/tonne, down 20-35 USD/tonne.

03 Market Outlook

Supply: The industry operating rate is expected to remain high in the short term, and market supply is generally sufficient. However, attention should be paid to possible maintenance or production cuts by some enterprises due to cost pressure or policy guidance, as the supply side may see staged contraction. Over the next three weeks, 5-6 enterprises are expected to conduct maintenance, while 4-5 enterprises are expected to restart. The supply trend features both maintenance and restarts, high-level fluctuations in daily output, and still sufficient supply year on year.

Inventory: Inventory accumulation pressure is prominent, and destocking remains slow. Current enterprise inventory pressure continues, destocking is slow, and high inventory restrains room for price rebounds. Whether inventories can be effectively reduced will depend on the actual start of autumn demand and export fulfillment.

Demand: As the autumn fertilizer preparation window approaches, compound fertilizer enterprises are expected to restock raw materials, which may provide some support for urea prices. However, concentrated agricultural purchasing is not expected to be strong, industrial demand will also mainly follow rigid demand, and overall demand growth is expected to be limited, making sustained price increases difficult. On exports, export demand is the core incremental variable at present. The market relies on overseas tenders for strong sentiment support, and the export window remains open, providing an important channel for diverting domestic supply. But export positives are uncertain, and the degree of export volume realization is uneven. In the short term, exports can only ease domestic supply-demand pressure in stages and cannot fully reverse weak demand. The key demand-side focus will be whether autumn fertilizer preparation starts materially and whether concentrated overseas export orders are fulfilled.