As is well known, for most of August this year, the factory price of urea in Shandong Lianghe and other places hovered between 2450-2600 yuan/ton. On August 8th, 16th, and 23rd, there were consecutive price increases within a day, with some manufacturers increasing by nearly 100 yuan. Urea prices can be described as high volatility! After all, under the Russia Ukraine War and European energy crisis in 2022, the factory price of urea in August 2022 only hovered around 2250-2400 yuan/ton. What are the reasons why urea remains high? Will urea continue to rise next week?

The export quantity is considerable, and the export prices are not bad or bad. In July, China exported about 320000 tons of urea, an increase of 114.7% year-on-year, doubling. The cumulative export volume from January to July was about 1.33 million tons, an increase of 52.3% year-on-year. Especially since the opening of India's bid on August 9th, there have been numerous and complex claims about the true export quantity of urea from China. Currently, it is relatively clear that India has won 1.759 million tons, while China has approximately 1.1 million tons. Considering the port inventory and in transit urea, there may still be a certain demand for replenishment. Whether it is cost-effective to export only based on our domestic factory price, and whether India will break the contract in the middle and later stages of such a large number of goods shipment.

The export price has set a relatively high reference price for China's off-season. China's high-end offshore small particle urea costs 375 US dollars per ton. Based on the exchange rate of 7.2 or 7.3 in the front, or 7.27 at present, it is equivalent to nearly 2500 yuan per ton produced in Shandong. However, if calculated at the low end of the offshore price, it is equivalent to less than 2450 yuan per ton produced in Shandong. Basically similar to the domestic factory fluctuation range of 2450-2600 yuan/ton this month, mainly due to Hebei's export advantage and high prices. Once there is a positive factor, hype coupled with the need for customers to pick up goods, it is natural for urea to fluctuate upwards.

Although domestic demand is late, it arrives. The collection and production progress of composite fertilizer enterprises in autumn are slower than in previous years. As time goes by, considering the sales time reserved for grassroots units after late September, the production speed of composite fertilizer enterprises may be appropriately accelerated before mid September. The procurement of nitrogen, phosphorus, and potassium raw materials will also be appropriately accelerated, which means that even if a suitable price cannot be reached, urea will have to be taken, which is a support for the short-term urea price. The autumn weather is refreshing, and the amount of urea taken by industrial plywood factories and power plants can also be slightly better. However, due to the economic downturn, these two aspects should have no support. However, in the near future and before early October, dealers will also use urea as the base fertilizer for winter wheat in October.

The decrease in supply is becoming increasingly evident. Not to mention the moderate reduction in production at some factories in Jincheng this week, the number of repairs carried out by manufacturers in Inner Mongolia and Ningxia this week is a bit high. As of Friday, the daily urea production was less than 160000 tons. If the quantity is reduced, downstream caution may be reduced, and if the price is high, it is still acceptable.

Futures have made urea increasingly a financial product. The rumors about the new bidding in India at the beginning of this week were sincere. On Wednesday morning, urea spot sales were still average. Soon, buyers picked up the goods in moderation, and factory receipts improved. A few factories made secondary bids, and some factories accumulated a price increase of 50 yuan/ton, which is very disappointing. For factories, adjusting prices based on order volume is understandable. For buyers, after such a long period of on-demand procurement, there are not many stocks in hand. Once there are stimulating factors, urea can only be added appropriately.

In summary, although there has been so much support both domestically and internationally. However, both positive and negative factors are likely to limit the top price of urea due to export prices (which have been falling for three weeks internationally). As prices rise slightly higher, buyers retreat again. The buyer and seller are relatively deadlocked, and for the time being, the seller has a slight advantage. After a slight cooling of urea this weekend, it is expected to rise moderately at some time next week. In short, the price is still high and volatile for the time being.