"Anti-Overwork" Affects Urea
Last Friday, the Ministry of Industry and Information Technology released a notice stating that the "Stable Growth Work Plan for Ten Key Industries including Steel, Nonferrous Metals, and Petrochemicals" is about to be issued. The ministry will promote these key industries to focus on adjusting the structure, optimizing supply, and eliminating outdated production capacity. Although the policy's focus is likely not on urea, the futures market was driven by this news on Friday night. The futures market interpreted the policy as being positive for urea, and some even speculated that the policy would also target the elimination of outdated production capacity in potassium chloride and phosphate fertilizer enterprises. The expectation of eliminating outdated production capacity has led to fluctuations and an increase in urea futures prices.
However, the main theme of domestic urea policy remains ensuring supply. The National Development and Reform Commission's notice on spring fertilizer supply for 2025 clearly requires strengthening the production of fertilizers. Since the beginning of 2025, domestic urea production has remained stable at around 195,000 to 205,000 tons per day, reaching a new high for the same period in history. Moreover, the elimination of outdated production capacity in Jincheng has not been forcibly scheduled. It is believed that the opening of the urea export window will continue to prioritize supply and price stability over the optimization of fertilizer production capacity.
Compound Fertilizer Plants to Start Up
It is now mid-July, and compound fertilizer factories have entered the start-up phase for autumn fertilizer production. The industry's operating rate is slowly increasing from a low level. However, due to policy control over the prices of phosphorus and potassium, there are many uncertainties. The downstream of compound fertilizers remains in a wait-and-see mood, and terminal demand is poor. The situation of picking up goods has not improved. Due to the competition between costs and demand, the increase in the operating rate of the compound fertilizer industry is relatively moderate and shows regional differentiation.
Continuous Decline in Enterprise Inventory
Since July, domestic urea enterprise inventories have continuously declined. As of now, the inventory is around 950,000 tons, and the trend of inventory reduction has persisted for several consecutive weeks, mainly driven by the concentration of export orders at ports. Although the total amount of urea export quotas for 2025 is limited and exports to India are prohibited, the concentrated accumulation of export orders at ports still provides support for inventory reduction for some enterprises. Additionally, social inventories are gradually increasing, and the off-season for industrial and agricultural demand will slow down the speed at which goods flow to the terminal. Continue to monitor changes in urea enterprise inventories.
June Exports Fall Short of Expectations
In the first half of July, the second batch of urea export quotas was issued, and domestic quota enterprises are exporting in an orderly manner. In June, domestic urea exports were only 66,200 tons, an increase of 63,800 tons from 2,400 tons in May, with a growth rate of 2,658.33%. However, it was a 10.75% decline compared to the same period last year. Despite the frequent news about urea exports supporting the domestic market in June and July, industry estimates for June's urea exports were around 300,000 tons, and some were even optimistic about reaching 1 million tons. However, given the lower-than-expected June exports and the relaxation of port inspections in July along with the issuance of the second batch of export quotas, it can be inferred that the customs clearance speed of urea exports in June was slow, and China's urea exports in July are likely to increase significantly.
Recently, domestic urea production has slightly declined to around 190,000 to 196,000 tons per day, and the upward momentum is insufficient due to weak demand. However, with the support of urea exports and news, prices have been fluctuating without a significant decline. The demand side has not seen fundamental changes. Pay attention to the progress of compound fertilizer factories' advance orders for autumn fertilizer, their purchasing pace of raw materials, and the impact of changes in phosphorus and potassium prices on the mentality of compound fertilizer factories and their downstream. Currently, the domestic urea market is still dominated by sentiment. On July 21st, the futures market sentiment was significantly strong, driving some spot factories to halt trading and some to raise prices multiple times in a single day. In the coming days, urea prices are expected to continue to rise for several days. At that time, continue to monitor changes in supply and demand and market sentiment.
