Urea Market Dynamics Report – Recent Commodity Market Intelligence

I. Price Trends
- Spot Prices: As of May 24, 2026, the ex-factory price of urea in Shandong Province stood at RMB 1,710–1,720/ton, down RMB 50/ton week-on-week (WoW); in Henan Province, it was RMB 1,730/ton, down RMB 80/ton WoW; in Hebei Province, RMB 1,750/ton, down RMB 30/ton WoW; in Shanxi Province, RMB 1,690–1,700/ton, down RMB 30/ton WoW; in Shaanxi Province, RMB 1,690–1,700/ton, down RMB 30/ton WoW; in Inner Mongolia, RMB 1,670/ton, down RMB 10/ton WoW; in Anhui Province, RMB 1,780–1,800/ton, down RMB 20/ton WoW; and in Hubei Province, RMB 1,740–1,750/ton, down RMB 100/ton WoW.
- Futures Prices: On May 25, the main September (UR2609) futures contract closed at RMB 1,826/ton, down RMB 27/ton WoW. On May 22, the main continuous contract (URM) reached a high of RMB 1,862/ton and a low of RMB 1,839/ton, closing at RMB 1,847/ton, with trading volume of 264,500 lots and open interest of 326,300 lots.

II. Supply-Demand Situation
- Supply Side
- Total urea output this week amounted to 1.4412 million tons, down 55,700 tons WoW and up 1.10% year-on-year (YoY), but down 3.72% WoW.
- Output of small- and medium-sized granules totaled 1.1445 million tons, down 35,000 tons WoW, down 3.06% YoY, and down 2.97% WoW; output of large granules reached 296,700 tons, down 20,800 tons WoW, down 3.26% YoY, and down 6.54% WoW.
- More plants initiated maintenance shutdowns this week, resulting in a sharp decline in daily output. Newly added maintenance units for small- and medium-sized granules include Xinjiang Zhongneng, Jilin Sinochem, Inner Mongolia Borun, China Coal, Shaanxi Longhua, Henan Dahuahua, Shandong Yankuang, Anhui Hong Sifang, and Sichuan Lutianhua; newly added maintenance units for large granules include Shanxi Tianze, Shanxi Fengxi, and Shanxi Lanhua.
- However, based on current average daily output, April’s total production is projected at ~6.38 million tons—higher than historical levels for the same period.
- Factory inventory stood at 776,500 tons this week, up 205,000 tons WoW and down 15% YoY, but up 36% WoW. Weaker demand coupled with falling prices dampened purchasing enthusiasm, impeding factory shipments and driving a substantial weekly inventory build-up.
- Social inventory: Downstream enterprises held raw material inventories of 79,500 tons, down 12,000 tons WoW. Compound fertilizer plants maintained low production activity, continuing to consume existing raw material stocks, with limited willingness to replenish. Northeast regional warehouse intake reached 52,000 tons, up 17,000 tons WoW; social inventory in Guangdong-Guangxi region totaled 93,000 tons, down 10,000 tons WoW—mainly consumption-driven, with no restocking or inventory accumulation observed. Port inventory totaled 147,900 tons, down 3,000 tons WoW. Export policies remain unchanged, and port inventory remains generally low.
- Demand Side
- Compound fertilizer plant operating rate plunged to 30.46%, down 4.93 percentage points WoW and down 7.11 percentage points YoY. Finished goods inventory at compound fertilizer plants stood at 730,300 tons, up 6,600 tons WoW and down 4% YoY. Summer fertilizer top-up orders have been delayed; new order transactions are sluggish; and frequent rainfall across multiple regions has hampered logistics and delivery, slowing shipment velocity. Consequently, compound fertilizer producers have reduced operating loads or halted production temporarily. While overall demand remains subdued, summer fertilizer demand still exhibits a gap, and partial resumption of production may occur around early June—potentially leading to volatility in operating rates.
- Agricultural demand is seasonally waning, providing insufficient support. Although April represents the peak agricultural demand window for urea, demand strength has declined entering May—even as corn top-dressing and basal application activities commence, overall agricultural demand intensity remains below prior levels.
- Melamine output this week was 32,900 tons, equivalent to ~98,700 tons of urea consumption per week. Melamine plant operating rates edged lower WoW, yet overall urea consumption remained stable.

III. Export Situation
- In 2026, the State continues its strict domestic supply security and price stabilization policy for urea, enforcing dual controls: export quotas (3.3 million tons, representing <5% of total output) and mandatory inspection (“Fa-Jian”). Customs inspections have been intensified to strictly prevent circumvention of export restrictions. In mid-April, market rumors circulated regarding imminent allocation of export quotas; however, authoritative channels swiftly denied such claims, confirming that no export quotas had been issued during the year, with domestic supply security remaining the top priority. Nevertheless, as domestic demand weakens comprehensively and inventories accumulate rapidly, export conditions have improved, prompting recurring speculation—and associated market volatility—about potential policy relaxation. Such rumors continue to exert intermittent influence on market sentiment.

IV. Cost Side
- With the upcoming summer peak electricity consumption season, coal prices are expected to remain relatively firm, pushing up urea production costs. However, spot price guidance limits upward pricing flexibility. Although profit margins have improved, upside remains constrained. Currently, natural-gas-based urea production remains unprofitable, whereas fixed-bed and water-coal-slurry processes are profitable.

Analysis & Outlook
- Short Term: Recently, the urea market has trended downward amid rising supply and weakening demand. Despite a sharp rise in factory inventories, the market interprets this buildup as signaling heightened probability of export policy relaxation—leading to increased futures price volatility. Yet, without actual policy adjustments and sustained lackluster demand, prices lack fundamental support. Further downward pressure stems from sharply declining compound fertilizer operating rates and seasonal softening of agricultural demand.
- Medium Term: Corn fertilizer demand will peak in May–June, supported jointly by industrial and agricultural demand—providing marginal demand uplift and offering some price floor support. However, uncertainty surrounding export policy remains a key market influencer. Absent export policy easing, the domestically oversupplied situation will persist, capping upside potential.
- Long Term: The Chinese urea industry is undergoing critical transformation and upgrading. Outdated production capacity is being gradually phased out, while high-quality capacity share rises steadily. Accelerated agricultural modernization and implementation of the “dual carbon” goals (carbon peak & carbon neutrality) will reshape urea demand structure: conventional agricultural urea’s market share may gradually decline, while value-added urea, specialty urea, and industrial-grade urea are expected to gain increasing market share—exerting profound long-term influence on urea price trends.

Forecast
- Price: In the short term, urea prices are likely to remain range-bound at low levels, constrained by off-season demand and ample supply, limiting any significant rally. In the medium term, increased demand during the corn fertilizer peak season may drive modest price recovery—but the magnitude depends heavily on export policy developments. If export restrictions remain stringent, the rebound will likely be muted; if policy eases, a more pronounced price increase could materialize. Long term, structural industry adjustment and evolving demand patterns will gradually steer urea prices toward a rational equilibrium range, potentially narrowing price volatility.
- Supply-Demand Balance: On the supply side, daily urea output may adjust dynamically in response to plant maintenance schedules and market demand, yet the prevailing supply surplus is unlikely to reverse significantly in the near term. On the demand side, agricultural demand will exhibit seasonal cyclical fluctuations, while industrial demand is expected to grow steadily. With ongoing industry transformation, demand for high-efficiency, eco-friendly urea products is anticipated to rise progressively.
- Exports: Export policy is expected to remain restrictive in the near term. However, evolving domestic supply-demand dynamics and growing international demand may prompt appropriate policy adjustments. Close monitoring of export policy developments—as well as global urea supply-demand fundamentals and price trends—is warranted.