In recent updates, the urea price in Sichuan has dropped below the production cost, raising concerns among local manufacturers. According to data from the China Nitrogen Fertilizer Network, the mainstream factory price of urea in the region is now at 1,700 yuan per ton. However, due to increased natural gas prices and ongoing production costs, local gas-based manufacturers are facing significant pressure. Industry sources indicate that the current production cost is approximately 1,800 yuan per ton, making it difficult for producers to maintain profitability. As a result, market prices have been gradually declining, with some low-end offers reaching as low as 1,650 yuan per ton.
Looking at the broader industry landscape, the domestic urea market experienced sharp fluctuations in July. The average factory price started the month at 1,700 yuan per ton but fell to 1,667.5 yuan by the end of the month. Recently, the price has dropped further to 1,632.5 yuan per ton. Analyst Zhang Ming from the business community suggests that a strong short-term rebound is unlikely. Most manufacturers remain cautious and do not expect a significant recovery soon. A potential upward trend might come later in August, driven by the seasonal demand for autumn fertilizers.
Currently, the agricultural fertilizer market in China is in an off-peak season, leading to reduced demand. Retailers are being more selective with their purchases, and overall industry operating rates are relatively low. Some manufacturers have scheduled maintenance and inspections, adding to the inventory challenges. One of the key factors dragging down urea prices is the continuous decline in coal prices. However, even with this drop, the price of coal-based urea is now approaching the cost line, indicating a tight margin for producers.
With these market dynamics, it's clear that the urea sector is navigating a challenging period, marked by fluctuating prices, rising costs, and weak demand. Producers are closely monitoring the situation, hoping for a turnaround as the agricultural season approaches.
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