Recently, urea prices have risen again after a brief decline. On the morning of October 15th, the factory price of urea mainly fell below. After being boosted by futures, some urea factories re set prices during the noon and afternoon of the same day, turning from a decline to an increase.

At present, the supply of urea in the market is sufficient, with a daily production of about 190000 tons of urea nationwide. Some units that have undergone early maintenance have resumed production or are about to resume production, and the supply of urea may continue to increase. From the perspective of demand, the current agricultural demand for urea is relatively low, mainly relying on autumn fertilization of winter wheat. In the early stage of winter wheat growth, from late September to early October, basal fertilizer application is needed to supplement nutrients in the soil, which will result in a certain demand for urea; However, the peak of compound fertilizer production has passed, and the operating rate has recently declined, resulting in a decrease in the supply of urea. In other industrial sectors, the demand for urea in sheet metal and power plants is relatively stable, with on-demand procurement being the main focus. Overall, new orders from urea companies are relatively limited, and the current market demand is difficult to keep up with supply, resulting in insufficient price action. However, futures will have a certain boosting effect on the spot market.
As a commodity, urea not only needs to consider the supply-demand relationship, but the recent supply-demand contradiction of urea has not been significantly alleviated, and the price has risen multiple times. It also needs to consider the impact of macroeconomic factors, futures markets, and market speculation. Some investors hoard and speculate on urea during the downturn, which has forcibly pushed up the price of urea in the spot market.

Recently, there has been an occasional upward trend in urea prices, but there is still a high possibility of another pullback. The domestic market is oversupplied, and urea production enterprises are often operating at full capacity or even exceeding their capacity to reduce costs. A few factories have also included expansion in their plans, and urea production will continue to increase, exceeding market demand. In previous years, urea was exported, which could consume a portion of the urea. This year, it is still necessary to ensure supply and stable prices. The strict urea inspection method means that the urea that should have been used for export in previous years remains in China, resulting in a slight increase in domestic supply. However, it is difficult for the domestic market to consume so much urea, leading to relatively low urea prices.

Although there has been an increase in recent days, the price of urea has not yet exceeded 2000 yuan/ton. After a slight increase in prices in the past three days, the factory price of small particle urea from a factory in Shandong has only reached 1800 yuan/ton, which is difficult to make up for the large decline in the previous period. Compared with the same period last year, the price of urea has fallen significantly. In mid October last year, the factory's factory price of small particle urea was around 2400 yuan/ton.

Given the ongoing risk of a downward trend in urea prices and the continued wait-and-see sentiment in downstream markets, most downstream customers believe that it is difficult for urea prices to rise significantly in the short term. They only purchase in small quantities as needed and have not stocked up in advance as in previous years. Urea companies are under significant pressure, and traders are mainly targeting industrial customers. Agricultural customers have low purchasing desires, and manufacturers' new orders are average. The downward pressure on prices in the domestic market will continue to exist.
In summary, the rise in urea prices is mainly due to the boost of futures rather than the improvement of actual demand. Currently, the supply-demand contradiction in China has not been effectively resolved, and occasional increases and decreases have limited stimulation on downstream demand. If appropriate exports can be made, it is an effective way to solve the supply-demand contradiction. Next, we need to pay attention to the real demand downstream, policies related to urea, especially the mentality of buyers.