Urea Weekly: Without Effective Positive Support, the Market Continues to Move Lower Weakly (August 28, 2026)

1. Urea Market Overview

1.1 Feidoodoo Price Index

The domestic urea market showed a weak, volatile downward trend this week, with fundamental imbalances remaining an important factor weighing on the market. Although plant maintenance caused a modest reduction in daily output, market supply remains ample. Inventory pressure remains significant, with no clear downward trend. Demand remains weak. Agricultural demand is temporarily limited, while industrial compound fertilizer producers are purchasing only at lower prices to meet rigid restocking needs. Market sentiment is stalled and subdued, overall demand support is insufficient, and spot and futures markets weakened together.

On the supply side, producer operating rates declined slightly this week, while national daily output remained above 200,000 tonnes. Producer inventories changed little from last week. Although maintenance and equipment failures caused temporary regional output reductions, producer and social inventories remain difficult to digest. Port inventories continued to rise as port accumulation accelerated, with upstream suppliers building stocks in advance of September vessel shipments. On the demand side, agricultural fertilizer demand is currently limited, with field topdressing largely complete and only sporadic restocking in certain cash-crop areas. Downstream compound fertilizer and melamine producers slightly increased operating rates but remained at relatively low levels. Purchases were limited to rigid-demand orders, with no concentrated large-scale restocking. Wood-panel and denitrification sectors provided only basic stable demand and could not generate meaningful incremental support. Overall, fundamentals have not undergone a material reversal. Without an effective positive catalyst, the market is expected to remain volatile and weak. Attention should focus on new Indian tender news, export changes, the start of autumn fertilizer procurement, and daily output.

According to Feidoodoo data, as of this Friday, the average domestic small-granular urea price index was 1,767.91 yuan/tonne, down 3.91 yuan/tonne from last week, or 0.22%.

During the first half of the week, the urea market traded weakly and volatile. Downstream demand was generally weak, agricultural demand was in the off-season, and industrial compound fertilizer producers purchased only to meet rigid demand. Supply remained ample despite production cuts at some plants, and inventory pressure remained significant. On the spot side, some producers recorded poor new-order sales and slightly lowered ex-factory quotations, while spot trading remained stalled and subdued. Futures prices weakened in tandem.

During the second half of the week, the urea market continued to trade weakly and volatile. Weak domestic demand fundamentals did not improve materially. Most producers recorded few new-order transactions and continued to lower ex-factory quotations slightly, while market trading remained stalled overall. However, prices had fallen to the low end of the annual range and were approaching the cost-support zone, allowing the market to enter a short-term consolidation phase with limited room for a further sharp decline. Futures prices generally weakened in line with the spot market and trading sentiment remained poor, although reports of another Indian tender at the end of the week provided some support to futures.

1.2 Delivery Area Quotations

Specifically, prices in Northeast China were stable at 1,780-1,800 yuan/tonne. Prices in East China fell to 1,680-1,740 yuan/tonne. In Central China, small- and medium-granular urea fell to 1,690-1,900 yuan/tonne, while large-granular urea was stable at 1,800-1,850 yuan/tonne. Prices in North China fell to 1,550-1,800 yuan/tonne. Prices in South China fell to 1,790-1,830 yuan/tonne. Prices in Northwest China were stable at 1,860-1,910 yuan/tonne. Prices in Southwest China fell to 1,660-2,000 yuan/tonne.

2. Industry Chain Developments

2.1 Daily Output

Output: Domestic urea output was approximately 1.3918 million tonnes this week, down 55,100 tonnes from last week, or 3.81%, but up 2.26% year on year. Daily output was 206,700 tonnes. Industry daily output remained above 200,000 tonnes during the week, supply remained ample, and market availability continued to fluctuate at high levels. Average daily output was 206,700 tonnes, up 1,100 tonnes from last week. Liaoning recorded a notable week-on-week output increase, while Hebei, Henan and Shaanxi recorded notable declines.

Operating rate: The domestic urea industry operating rate was approximately 83.33%, down 3.30 percentage points week on week but up 0.94 percentage points year on year. The operating rate declined during the week but remained above the level recorded in the same period last year. Operating rates rose in Liaoning and declined in Hebei, Henan and Shaanxi.

By product type, large-granular urea output was approximately 306,600 tonnes, down 1,400 tonnes from last week, or 0.45%, but up 53,800 tonnes year on year, or 21.28%. The operating rate for large-granular urea was approximately 88.51%, down 0.40 percentage points from last week but up 12.50 percentage points year on year. Small- and medium-granular urea output was approximately 1.0852 million tonnes, down 53,700 tonnes from last week, or 4.72%, and down 11,200 tonnes year on year, or 1.02%. The operating rate for small- and medium-granular urea was approximately 81.98%, down 4.05 percentage points from last week and 2.04 percentage points year on year.

By production route, coal-based urea output was approximately 1.1005 million tonnes, down 68,600 tonnes from last week but up 32,200 tonnes year on year. Its operating rate was approximately 83.76%, down 5.22 percentage points from last week and 2.80 percentage points year on year. Gas-based urea output was approximately 291,300 tonnes, up 13,500 tonnes from last week and 10,400 tonnes year on year. Its operating rate was approximately 81.73%, up 3.78 percentage points from last week and 6.09 percentage points year on year.

2.2 Market Inventories

Producer inventories: Producer inventories were approximately 1.6710 million tonnes this week, down 7,300 tonnes from last week, or 0.43%, but up 713,600 tonnes year on year, or 74.54%. Domestic producer inventories showed regional divergence. Concentrated maintenance in some regions directly reduced inventory accumulation by temporarily lowering output, while the effective progress of exports diverted some domestic supply. However, cargo flows from outlying regions remain insufficient, the supply-demand imbalance is difficult to ease fully, and there are even clear signs of inventory accumulation. Inventory trends therefore differ by region, and an overall decline in producer inventories is not yet apparent. Inventories increased in Anhui, Hainan, Hebei, Jiangsu, Qinghai, Shandong, Shanxi, Shaanxi and Xinjiang, while they declined in Gansu, Henan, Heilongjiang, Hubei, Jiangxi, Inner Mongolia, Sichuan and Chongqing.

Port inventories: Total port inventories were 1.0766 million tonnes, up 113,900 tonnes from last week, or 11.83%, and up 583,600 tonnes year on year, or 118.38%. Port accumulation continued to improve. Previously secured Indian tender cargoes and regular export orders are still being executed as scheduled, continuing to divert domestic supply. However, inventories at some major ports are high and cargoes are close to saturation, limiting the efficiency of further port accumulation. Major changes included large-granular cargoes accumulating at Qingdao, Rizhao and Huanghua ports, and small-granular cargoes accumulating at Tianjin, Zhenjiang and Huanghua ports. A few ports began to record sporadic departures.

Large granules: Domestic port inventories of large-granular urea were 456,600 tonnes this week, up 17,800 tonnes from last week, or 4.06%, and up 85,600 tonnes year on year. Large-granular urea port inventories increased slightly during the week and remained above the level recorded in the same period last year.

Small granules: Domestic port inventories of small-granular urea were 620,000 tonnes this week, up 96,100 tonnes from last week, or 18.34%, and up 490,000 tonnes year on year. Small-granular urea port inventories increased sharply during the week and remained above the level recorded in the same period last year.

2.3 Compound Fertilizer Industry

The domestic compound fertilizer market continued weak consolidation this week. Prices appeared stable on the surface but were adjusted selectively, bargaining between upstream and downstream participants was pronounced, and overall trading was subdued.

As of this Friday, the domestic 45% sulfur-based compound fertilizer price index was 3,395.00, while the 45% chloride-based compound fertilizer price index was 2,880.91.

On the cost side, raw material prices moved in opposite directions. Urea prices continued to decline, synthetic ammonia traded with a volatile but firmer tone, and sulfuric acid prices rose somewhat. Prices of phosphate fertilizers, potash fertilizers and ammonium chloride changed only marginally, leaving insufficient overall cost support for compound fertilizer and affecting market sentiment. On the supply side, compound fertilizer operating rates were 34.11% this week, up 3.30 percentage points from last week. Previously idled plants resumed operations and supply increased. Producers flexibly adjusted operating rates according to orders, but overall utilization remained low, with production focused on consuming advance orders. New-order growth was limited.

On the demand side, as the fertilizer procurement window shortened and some producers introduced shipment incentives, downstream receiving sentiment improved and shipment volumes increased in some regions. Supply-demand activity therefore increased slightly, providing some support. Overall, the compound fertilizer market is expected to maintain a weak but slightly warmer pattern next week. At month-end, producers will mainly focus on stable prices and shipments, using existing advance orders to ensure deliveries. To meet short-term shipment targets, some transactions may still involve flexible concessions. Whether prices can move higher will depend on the actual release of rigid demand for autumn sowing and on upstream raw material trends. Attention should remain on procurement progress and raw material developments.

2.4 Melamine Industry

The domestic melamine market followed a pattern of initial weakness followed by a rebound from low levels, with sentiment changing significantly during the middle of the week. Prices continued to fall early in the week, but as expectations of supply contraction strengthened, producers became more confident in supporting prices and offers rose across the market. Trading sentiment improved from earlier levels and the transaction benchmark moved slightly higher.

On the cost side, upstream urea prices remained weak and volatile and declined repeatedly, significantly weakening cost support for melamine. On the supply side, the melamine industry operating rate was 50.77% this week, down 3.18 percentage points from last week. Supply was the key factor behind the market reversal. Although capacity utilization remained at a low-to-mid range for the year, some plants gradually increased operating rates while expectations of future supply reductions strengthened. Some producers began suspending new orders to control shipment pace.

On the demand side, trading sentiment improved somewhat. Traders were encouraged by the expectation of rising prices, and rigid-demand restocking increased, but willingness to purchase large volumes remained limited and the scope for actual demand improvement was small. Overall, expectations of supply contraction provided some short-term support and the market may remain firm. However, with no material improvement in demand and weak cost support, upward momentum remains insufficient. Prices are still in a long-term low range, so although downside room is limited, attention should remain on producer operating-rate adjustments, new-order transactions and changes in market sentiment.

2.5 International Market Quotations

China bulk small-granular urea FOB was USD 380.01-395.01/tonne, up USD 10-20/tonne. Black Sea small-granular urea FOB was USD 350.01-375.01/tonne, up USD 15-30/tonne. Baltic small-granular urea FOB was USD 345.01-370.01/tonne, up USD 15-30/tonne. Middle East small-granular urea FOB was USD 395.01-410.01/tonne, up USD 5-20/tonne. Brazil small-granular urea CFR was USD 390.01-415.01/tonne, with the high end up USD 15/tonne. India CFR was USD 390.01-394.01/tonne, unchanged from last week.

Iran large-granular urea FOB was USD 325.01-345.01/tonne, unchanged. Egypt large-granular urea FOB was USD 490.01/tonne, up USD 15-60/tonne. Brazil large-granular urea CFR was USD 435.01-445.01/tonne, up USD 5-25/tonne. Southeast Asia large-granular urea CFR was USD 425.01-445.01/tonne, up USD 10-30/tonne. China large-granular urea FOB was USD 395.01-410.01/tonne, up USD 5-10/tonne.

3. Market Outlook

On the supply side, maintenance and restarts will occur simultaneously in the later period. Temporary reductions in operating rates will cause short-term supply contraction but will not change the broader pattern of ample supply. Most producers remain reasonably willing to operate. Without significant losses forcing action, willingness to make substantial voluntary production cuts is limited, and new capacity is also expected to be released. Over the next three weeks, five producers are expected to enter maintenance and 10-11 producers are expected to restart. Based on maintenance and restart schedules, daily output is likely to fluctuate at low levels initially over the next two weeks and then gradually increase, with supply becoming looser again.

On the inventory side, overall industry inventory pressure remains. Inventory patterns differ by region, and some cargoes are being transferred to ports, representing inventory migration rather than actual consumption. Subsequent inventory changes will depend mainly on the pace of supply releases and the market's ability to digest domestic and export demand. If downstream purchasing remains weak, producers still face a risk of inventory accumulation. If concentrated export shipments and downstream restocking begin, inventories may gradually decline. Producers will continue to adjust shipment strategies according to their own inventory levels, and producers with high inventories may still offer concessions to facilitate sales.

On the demand side, the domestic agricultural market has not yet reached a concentrated fertilizer-use period. Autumn sowing procurement is the main rigid-demand factor to watch. The timing of procurement and farmers' willingness to apply fertilizer will directly affect the release of purchasing demand. In the industrial sector, downstream compound fertilizer and melamine producers are mainly purchasing to meet rigid demand. Large-scale raw material restocking has not yet appeared, and purchasing as needed remains the norm. Demand recovery is occurring with a time lag and will be gradual. Sustained large-scale volume growth is unlikely in the short term, and the market will continue to show periodic, pulse-like demand releases.