The domestic urea market fluctuated and rose in May

Recent trends in urea prices


In May, the overall domestic urea market showed a fluctuating upward trend. Affected by supply tightening and an increase in factory orders, urea prices have continued to rise, and the upward trend has continued until the third week after May Day. In the last week of May, the market stopped rising and slightly declined. According to the Commodity Analysis System of Business Society, the price of urea in Shandong Province increased from 2435 yuan/ton at the beginning of the month to 2493 yuan/ton at the end of the month, with a growth rate of 2.36%.


From the supply side, the average operating rate of urea enterprises this month is less than 80%, and the daily production of urea in China is about 180000 tons, with supply slightly narrowing compared to last month. During the month, the mainstream urea manufacturers in Shandong generally saw an increase in factory prices, with an overall increase or decrease of over 100 yuan/ton.


From the upstream market perspective:


Liquefied natural gas: The price of natural gas rose in May. According to the Commodity Market Analysis System of Business Society, as of May 31, the average price of liquefied natural gas in China was 4414 yuan/ton, which is 4356 yuan/ton compared to the average price on May 1. The increase in domestic liquefied natural gas prices this month was 1.33%. High natural gas prices provide support for downstream urea production.


Coal: Coal has been operating strongly this month. Taking thermal coal as an example, according to the commodity market analysis system of Business Society, the overall price of thermal coal increased in May. The price of thermal coal in the port market has increased, and the daily consumption of power plants has basically returned to pre holiday levels. Especially in the latter half of the year, the price increase was driven by the rise in coal prices from production areas, resulting in an increase in port coal prices. It is also because as the temperature rises and the peak sales season arrives, downstream demand increases, driving up coal prices. Some traders have expectations for an increase in coal prices and are hesitant to sell, but actual downstream demand is limited. The overall price of thermal coal is currently fluctuating in the market. The upward trend in upstream coal prices provides support for the urea market.


Liquid ammonia: In May, the domestic liquid ammonia market was mainly volatile and rising, breaking out of a trend of first rising and then falling. According to the Commodity Market Analysis System of Business Society, liquid ammonia recorded a growth rate of 3.91% in May. At the end of the month, the mainstream quotation in Shandong region is between 3000-3200 yuan/ton. The rising price of liquid ammonia provides support for the downstream urea market.


From the perspective of downstream demand: the peak season of agricultural demand has been postponed, while industrial demand is average. Downstream demand for replenishment continues. The production of compound fertilizers is advancing, and there is a high demand for agricultural fertilizers in central and eastern China. The surplus temperature during the peak demand season has not yet subsided. Support the maintenance of relatively high levels of urea prices. The shipment volume of urea manufacturers is at a high level, with prices generally rising. According to the Commodity Market Analysis System of Shengyishe, as of May 31st, the average price of melamine enterprises was 7000.00 yuan/ton, a decrease of 0.36% compared to the price on May 1st.


Future Market Forecast

On the supply side, some devices are expected to start production and there is room for improvement in production. It is expected that the daily urea production will continue to rise next week, so it is not ruled out that the supply will increase in the future. However, considering the current low inventory rate of manufacturers, the supply pressure will be relatively eased in the short term.


On the demand side, agricultural demand remains primarily in demand, with an increase or decrease in demand due to a decrease in downstream compound fertilizer production rates and a slowdown in downstream delivery. In addition, the agricultural fertilizer preparation node has not yet arrived, and the next two weeks are in a period of agricultural demand gap, and the centralized procurement period has not yet arrived.


Taking all factors into consideration, the recent increase in urea prices lacks momentum, and it is not ruled out that there may be a possibility of price decline.