In the Sichuan region, urea prices have recently dropped below production costs, marking a significant shift in the local market. According to data from the China Nitrogen Fertilizer Network, the mainstream factory price of urea has fallen to 1,700 yuan per ton. However, local gas-based manufacturers are facing rising production costs due to increased natural gas prices, with some estimating their current cost at around 1,800 yuan per ton. As a result, prices have been steadily declining, and some low-end deals are now as low as 1,650 yuan per ton.
From a broader industry perspective, the domestic urea market experienced sharp fluctuations in July, starting with an initial rise before falling sharply. At the beginning of the month, the average factory price was around 1,700 yuan per ton, but by the end of July, it had dropped to 1,667.5 yuan per ton. The latest reported price is even lower, at 1,632.5 yuan per ton. Analyst Zhang Ming from the business community suggests that a strong short-term rebound is unlikely, as manufacturers remain cautious and do not expect a significant recovery soon. A potential upward trend might only emerge in late 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 purchasing activity among dealers. Many are adopting a more conservative approach when it comes to procurement, which has resulted in lower operating rates across the industry. Some manufacturers have scheduled maintenance and inspections, while inventory levels remain high. One of the main factors dragging down urea prices is the continuous decline in coal prices. Despite this, the price of coal-based urea is now approaching the cost line, indicating a delicate balance between supply and demand.
As the market continues to adjust, stakeholders are closely monitoring developments, especially as the upcoming agricultural season could bring new dynamics to the urea market.
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