1. Market volatility after the holiday

Before and after the Spring Festival holiday, the domestic urea price increased by around 200 yuan/ton. As the holiday came to an end, the main agricultural production areas needed to replenish their inventory, resulting in a significant increase in upstream shipments. Some factories controlled the quantity and received orders, while others rose twice a day. As a result, the domestic urea price showed a comprehensive upward trend. After the holiday, urea futures opened with a bearish spot trading mentality of opening high and closing low. In addition, the nationwide cooling, rainy and snowy weather has affected the sustainability of agricultural demand and significantly affected market shipments. Subsequently, there was a significant reduction in new orders from upstream factories, and the market's supply of low-priced goods began to increase. Due to pressure from inventory and flow, some factories have gradually loosened and decreased prices, with an overall decrease of 30-90 yuan/ton. As of this Tuesday, the reference price for small and medium-sized particles in the main production area is 2120-2260 yuan/ton, with low-end prices slightly higher than those before the Spring Festival, ranging from 10-80 yuan/ton.

2. Supply remains high

This week, devices such as Anhui Liuguo, Inner Mongolia Tianrun, Sichuan Jiuyuan, and Jiangsu Linggu will experience a narrow decline in daily urea production due to malfunctions or planned maintenance, but the fluctuation may still be around 180000 tons. In addition, although the price of synthetic ammonia has rebounded, its sustainability still needs to be observed. In the future, attention will be paid to the sustainability of purchasing from phosphate compound fertilizer factories. However, the current price of synthetic ammonia is still hovering at the edge of the cost line. Therefore, synthetic ammonia urea cogeneration units may be more inclined towards urea production. From this perspective, apart from normal maintenance and sudden malfunctions, the daily urea production in China may continue to maintain a high level during the spring plowing period.

3. Expected rebound in demand

The demand side has significantly warmed up, and the domestic compound fertilizer production has significantly rebounded before and after the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival) Festival. However, before and after the Spring Festival, the mainstream compound fertilizer factories have sufficient stock of raw material urea, so the procurement is still mainly based on multiple batches and small batches of bargain hunting. In addition, with the gradual correction of urea prices, the temperature has gradually risen, and the agriculture in the main production areas may continue to usher in a wave of procurement. Although there is an expectation of an increase in demand, the current recovery speed is not as fast as expected. Not only the demand side is following suit on dips, but also a considerable number of intermediaries are following suit to replenish goods. Therefore, as upstream sources of goods gradually shift to the middle and downstream, market sources of goods will continue to increase.

At present, the game between manufacturers continues, and the phased bottom price of urea has been once again determined. Based on the price of 2150-2170 yuan/ton in Shandong and Henan, urea factories will increase their prices when orders are good, and local high prices will continue to decrease their orders. Whether the price of urea can continue to rise in the later stage still requires close attention to the recovery speed of the demand side, the game situation of supply and demand changes, the futures market, and the pace of procurement in the middle and lower reaches.