Impact of Spring Ploughing on Urea in China BY:Cherry
As the domestic temperature gradually rises, the demand for fertilizers for spring ploughing is concentrated, and the fertilizer market has ushered in a phased recovery. Urea and potash fertilizers are the core categories of fertilizers for spring ploughing, and their price fluctuations have become the focus of market attention. The urea market has bottomed out and rebounded after a long period of downturn, and the activity of futures and spot transactions has increased significantly;
Urea market: low operating rate and demand recovery, price bottom rebound.
After a long period of downturn, the urea market has seen marginal improvement in the supply and demand pattern. On the one hand, due to the continuous pressure on industry profits, the operating rate of urea production enterprises has been at a low level for a long time, and the supply side is not flexible enough. On the other hand, the start of the demand for fertilizers for spring ploughing and the expectation of a new round of bidding in India have promoted the recovery of domestic purchasing sentiment. Although the data of the National Bureau of Statistics showed that the manufacturing PMI in January 2025 fell by 1 percentage point month-on-month to 49.1, fertilizers, as rigid demand categories, are less affected by macro fluctuations, and the market trading activity has increased significantly.
The adjustment of corporate production strategies has further exacerbated the contradiction between supply and demand. Under the pressure of previous losses, some urea producers chose to extend the maintenance cycle, resulting in limited short-term capacity release. At the same time, downstream compound fertilizer companies prepared stocks in advance to meet the demand for spring farming, further amplifying the market's demand for urea. This mismatch between supply and demand pushed urea prices to rebound from the bottom, and the inventory of the industrial chain gradually shifted to the terminal.
From the perspective of market sentiment, the rise in urea futures prices has a positive impact on spot prices. Traders and downstream companies are more willing to replenish their stocks, and the focus of market transactions has moved up. Although the overall operating rate of the industry is still low, the concentrated release of demand may continue to support price repair in the short term.
In 2025, the country is expected to add 6.6 million tons of urea production capacity per year. Among them, three urea units with a total urea production capacity of 1.9 million tons per year are expected to be put into production in the first half of 2025, and urea supply capacity will be further enhanced. If the company maintains the operating rate in 2024, it is expected that the urea output in 2025 will reach a maximum of 71 million tons.
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