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Urea Market Dynamics Intelligence, Analysis, and Forecast
I. Current Market Price Dynamics
(A) Futures Market
- Main Contract: As of May 25, 2026, the urea main contract closed at RMB 1,844/ton, up 0.99% from the previous trading day. The opening price was RMB 1,860/ton, with a daily high of RMB 1,862/ton and a low of RMB 1,839/ton. Open interest stood at 333,500 lots, increasing by 6,843 lots day-on-day.
- Other Contracts: Urea contracts 2608, 2609, 2610, and 2701 all opened at RMB 1,860/ton; their prior settlement prices were RMB 1,823/ton, RMB 1,826/ton, RMB 1,818/ton, and RMB 1,833/ton, respectively.
(B) Spot Market
- Regional Prices:
Shandong ex-factory price: RMB 1,720–1,740/ton, down RMB 50/ton week-on-week (WoW).
Henan ex-factory mainstream price: ~RMB 1,720–1,730/ton, down RMB 80/ton WoW.
Hebei small-granule ex-factory price: RMB 1,740–1,760/ton, down RMB 30/ton WoW.
Anhui ex-factory price: ~RMB 1,770–1,780/ton, down RMB 20/ton WoW.
Shanxi ex-factory price: RMB 1,680–1,700/ton; large-granule price: RMB 1,830/ton, down RMB 30/ton WoW.
Shaanxi ex-factory price: RMB 1,700–1,720/ton, down RMB 30/ton WoW.
Hubei ex-factory price: RMB 1,750–1,780/ton, down RMB 100/ton WoW.
- Grade Differential: Shanxi large-granule urea priced at RMB 1,800/ton, down RMB 35/ton WoW; demand for large granules remains comparatively weak. The price spread between large granules and small/medium granules stands at RMB 100/ton, narrowing by RMB 5/ton WoW.
II. Market Influencing Factor Analysis
(A) Supply Side
- Production Trends: National urea output this week totaled 1.4412 million tons, down 55,700 tons week-on-week (WoW), representing a 1.10% year-on-year (YoY) increase but a 3.72% WoW decline. Small/medium granule output amounted to 1.1445 million tons (down 35,000 tons WoW); large-granule output reached 296,700 tons (down 20,800 tons WoW). More plants entered maintenance, leading to a sharp drop in daily output. Nevertheless, urea capacity utilization remained elevated at 89.63% in mid-May, with average daily output ranging between ~201,000–214,000 tons—still near historical highs, indicating ample supply.
- Inventory Status:
Factory Inventory: This week’s factory inventory stood at 776,500 tons, up 205,000 tons WoW (+36%) and down 15% YoY. Weaker demand coupled with falling prices dampened purchasing enthusiasm, resulting in significantly slower factory sales and a notable inventory buildup.
Social Inventory: Downstream enterprises held raw material inventories of 79,500 tons, down 12,000 tons WoW; compound fertilizer plants maintained low production activity and continued consuming existing raw material stocks, exhibiting minimal proactive restocking intent. Northeastern region warehouse inflows reached 52,000 tons, up 17,000 tons WoW; Guangdong-Guangxi regional social inventory totaled 93,000 tons, down 10,000 tons WoW.
Port Inventory: Total urea port inventory stood at 147,900 tons this week, down 3,000 tons WoW. With no relaxation in export policy, port inventories remain at historically low levels.
(B) Demand Side
- Agricultural Demand: The peak spring-sowing fertilizer application season has passed. The summer maize and rice top-dressing window will not truly open until mid-to-late June; thus, agricultural demand has entered its seasonal low season and provides insufficient support.
- Industrial Demand: Compound fertilizer plant capacity utilization declined to 35.39%, down 3.07 percentage points WoW. Demand from industries such as wood-based panels also remains sluggish. Urea procurement strategies among industrial users have shifted from “buying on dips” to “just-in-time purchasing.”
(C) Policy & Export Environment
- Supply Guarantee and Price Stability Policy: National authorities continue strict policies to ensure domestic supply and stabilize prices. Urea exports are subject to dual controls—quota allocation and mandatory inspection—and customs inspections have been intensified to prevent circumvention via unofficial channels. No export quotas were issued in 2026; domestic supply security remains the top policy priority.
- Export Rumor Volatility: Following India’s April tender, the domestic-international price differential surged into the thousands of RMB per ton, triggering strong market expectations of export liberalization and driving significant gains in urea futures. Recently, however, broad-based domestic demand weakness and rapid inventory accumulation have improved export feasibility, reigniting frequent rumors of potential policy easing—repeatedly stirring market sentiment—yet no official policy adjustments have occurred.
(D) International Market
- Price Trends: Impacted by Middle Eastern military conflict, international urea prices surged sharply—FOB Middle East prices rose over 75%. On April 15, India’s IPL urea import tender concluded, with minimum landed prices reaching USD 959/ton (East Coast) and USD 935/ton (West Coast), surging over 80% compared to levels two months earlier. Domestically, however, urea ex-factory prices hovered around RMB 1,800/ton as of mid-April. Even after deducting all associated costs, potential per-ton export profit still exceeded RMB 3,000.
- Supply-Demand Impact: Several urea facilities in the Middle East have been forced offline or scaled back operations, while key global trade corridors face disruption, turning supply-demand deficits from expectation into reality. Even if shipping lanes resume normal operation, short-term supply gaps cannot be rapidly filled; medium- to long-term impacts are expected to persist.
III. Analytical Assessment
(A) Short-Term Outlook
- Price Trend: Constrained by high supply, seasonal demand weakness, and mounting inventories, urea prices lack substantive support in the near term and are likely to trade range-bound with a bearish bias. However, the recent unexpected coal mine incident in Shanxi has provided cost-side support to coal chemical products—including urea—potentially limiting downside price movement.
- Market Sentiment: Renewed export speculation has triggered a futures rebound from lows, accompanied by a sudden surge in spot-market low-price transactions, improving overall sentiment. Yet without concrete policy signals and amid persistently weak demand, market sentiment remains volatile and uncertain.
(B) Medium-Term Outlook
- Demand Evolution: Agricultural demand is expected to rebound starting mid-to-late June as the summer maize and rice top-dressing season commences, potentially offering modest price support. However, the outlook for industrial demand remains uncertain: should compound fertilizer and panel-sector demand remain depressed, upside potential for urea prices will remain constrained.
- Supply Pressure: As recently idled facilities gradually resume operations, daily urea output is expected to rise, further intensifying supply pressure. Absent export policy relaxation, the domestic market’s oversupplied condition is unlikely to ease, keeping prices under persistent pressure.
IV. Forecast
(A) Price Range
- Short Term: Spot urea prices are projected to fluctuate within RMB 1,700–1,800/ton. Futures prices—more sensitive to sentiment and export rumors—may exhibit wider volatility but will generally track spot price movements.
- Medium Term: Should agricultural demand recover as anticipated, urea prices may experience a limited rebound. However, constrained by ongoing supply pressure and weak industrial demand, the upward move is expected to be modest; spot prices are forecast to trade within RMB 1,800–1,900/ton.
(B) Market Trend
- Overall, the domestic urea market’s oversupplied structure is unlikely to shift materially in the near term. Price dynamics will continue oscillating between current seasonal weakness and export-related expectations. Without export policy relaxation, domestic urea prices will remain under pressure, sustaining a weak, range-bound trading pattern.
- Long Term: Accelerated agricultural modernization and implementation of China’s “dual carbon” goals (carbon peak and carbon neutrality) will drive the urea industry toward higher-quality development. Industrial restructuring is expected to advance further, promoting dynamic supply-demand equilibrium and maturing pricing mechanisms—ultimately reducing the amplitude of cyclical price fluctuations.
Agriculture usesMore than 90% of world industrial production of urea is destined for use as a nitrogen-release fertilizer. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in common use. Therefore, it has the lowest transportation costs per unit of nitrogen nutrient.In the soil, it hydrolyses back to ammonia and carbon dioxide. The ammonia is oxidized by bacteria in the soil to nitrate, which can be absorbed by the plants. Urea is also used in many multi-component solid fertilizer formulations. Urea is highly soluble in water, therefore, very suitable for use in fertilizer solutions (in combination with ammonium nitrate: UAN), e.g., in ‘foliar feed’ fertilizers. For fertilizer use, granules are preferred because of their narrower particle size distribution, an advantage for mechanical application. The most common impurity of synthetic urea, biuret, must be present at less than 2 percent of the time, as it impairs plant growth.
The urea molecule is planar in the crystal structure, but the geometry around the nitrogens is pyramidal in the gas-phase minimum-energy structure. In solid urea, the oxygen center is engaged in two N-H-O hydrogen bonds. The resulting dense and energetically favourable hydrogen-bond network is probably established at the cost of efficient molecular packing: The structure is quite open, the ribbons forming tunnels with square cross-section. The carbon in urea is described as sp2 hybridized, the C-N bonds have significant double bond character, and the carbonyl oxygen is basic compared to, say, formaldehyde. Urea's high aqueous solubility reflects its ability to engage in extensive hydrogen bonding with water.Urea dissolved in water is in equilibrium with the isomeric ammonium cyanate. The resulting activity of the isocyanic acid ions do result in carbamylation (formation of long-chain carbamides, liberating ammonia molecule as byproduct) of proteins if proteins are present in the solution too. The carbamylation reaction may occurs at elevated temperatures even without catalysts. At room temperature, water solutions of urea are prone to same decomposition reaction in the presence of urease. The isomerization of urea in solution at room temperature without catalysts is a slow process (taking days to reach equilibrium), and freshly prepared, unheated solutions had negligible carbamylation rates.Urea can react with alcohols to form urethanes and react with malonic esters to make barbituric acids.
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