Since the beginning of this year, the urea market has been surrounded by pessimistic sentiment, especially since the second half of the year when the overall purchase and sales progress has been relatively slow, and prices have only been adjusted slightly. As of now, the overall price in China has been hovering around 1700-1800 yuan/ton, and the supply-demand contradiction has not eased. There is resistance to the rise, but of course, it is also difficult to explore downwards, as urea companies face obvious cost pressures; Last year, the mainstream ex factory quotation for urea was around 2300-2500 yuan/ton. There is a significant price difference compared to the same period, which can be attributed to three reasons. Firstly, the grain prices this year are lower than last year. In addition to the impact on planting enthusiasm, policy regulation of the fertilizer market is inevitable. Secondly, there is a significant increase in urea production capacity this year, which has led to prices approaching the cost line. Thirdly, the tightening of urea exports this year has deepened. What will happen to the domestic urea market next?

At present, the urea market is mainly weak and stable, and downstream market procurement is generally carried out on demand. However, production and sales are still difficult to maintain a balanced state, and prices have been slightly consolidated. According to statistics from China Fertilizer Network, the mainstream ex factory price of urea in Shandong region is around 1750-1770 yuan/ton, in Shanxi region it is around 1670-1820 yuan/ton, and in Jiangsu and Anhui regions it is around 1740-1830 yuan/ton. However, downstream demand has been weak in recent times, with sufficient grassroots arrivals, and some markets have prices but not markets. The overall trend in the later stage needs to be seen from the aspects of supply and demand and policies.

Firstly, the supply of urea is sufficient, but there is a local surplus, especially significantly higher than the same period last year. Recently, some gas head urea enterprises have limited or stopped production for maintenance. According to China Fertilizer Network, the daily production of urea is about 184500 tons. A few gas head enterprises will also enter the winter maintenance period, during which the supply may slightly decrease, but the impact on the overall load is insignificant; In addition, new urea production capacity will be gradually released by the end of the year and the first quarter of next year. At that time, the overall supply of goods will significantly increase, and the supply pressure will gradually increase; Furthermore, the liquid ammonia market has been sluggish recently, with prices mainly falling. In the later period around the Spring Festival, due to factors such as demand and transportation, the trend of liquid ammonia is still bearish, and the support for urea in terms of production focus is relatively weak; In addition, the urea inventory generated by local upstream and downstream markets in recent times cannot be ignored.

Secondly, the demand for urea is relatively weak, and industrial and agricultural procurement is mainly based on demand. In terms of agriculture, it is in the off-season, with a small proportion of scattered demand and a strong wait-and-see attitude in the grassroots market; Some large and medium-sized traders only maintain a normal pace of light storage and reserve of urea. Due to the frequent fluctuations in urea prices, especially the bearish attitude towards long-term trends, their willingness to reserve large orders is not high. Currently, they mostly maintain back-to-back operations; The operating rate of compound fertilizer plants in the industrial sector is still as low as about 30%. Due to the overall weakness of raw materials in recent times, winter storage prices are also under pressure. The progress of goods delivery has been slow recently, and the production enthusiasm of enterprises is low, resulting in limited procurement of raw material fertilizer urea.

From the perspective of domestic policies to ensure supply and stabilize prices, there is currently no sign of relaxation in urea exports; In addition, compared with the same period last year, the current grain prices are relatively low, and the planting enthusiasm in the grassroots market is low, which may affect the fertilizer structure or dosage in the later stage. However, the low price of urea puts significant cost pressure on enterprises, making it difficult to have a significant downward trend. Moreover, frequent fluctuations in the futures market can also have an impact on the spot market.

Overall, the urea market lacks significant positive support in the short term, and under the influence of supply and demand contradictions, the overall market should operate weakly, with prices consolidating at low levels.