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The sales of urea have shown slight improvement, with market prices rising slightly. Author/Source: China Fertilizer Network. Date: January 9, 2020. Page views: 200. I. Performance of the domestic urea spot market 1.1 Changes in the domestic urea price index Last week (December 30, 2019 – January 3, 2020), sales at the grassroots level in the urea market improved slightly, and prices rose marginally. http://img.yf116.cn/image/img/20200109/1444535309396.PNG On January 6, China’s urea wholesale price index (CNPI) was 1817.40 points, up by 3.33 points on a month-on-month basis, representing a growth rate of 0.18% ； A decrease of 196.59 points on a year-on-year basis, representing a decline of 9.76% ； It dropped by 45.85 points from the base period, representing a decline of 2.46%. http://img.yf116.cn/image/img/20200109/1446505321057.PNG On January 6, China’s retail urea price index (CNRI) was 1944.29 points, up by 1.10 points on a month-on-month basis, representing a increase of 0.06% ； A decrease of 200.62 points on a year-on-year basis, representing a decline of 9.35% ； It rose by 39.33 points compared to the base period, representing a growth rate of 2.06%. http://img.yf116.cn/image/img/20200109/1449565339688.PNG On January 6, China’s urea export price index (CNEI) was 1740.43 points, up by 19.43 points on a month-on-month basis, representing a growth rate of 1.13% ； A decrease of 227.52 points on a year-on-year basis, representing a decline of 11.56% ； It dropped by 118.57 points from the base period, representing a decline of 6.38%. 1.2 Domestic urea market price trends Last week, the wholesale prices of urea remained relatively stable across various regions in the country. In the four provinces and municipalities of Henan, Hunan, Jiangxi, and Guangdong, prices increased by 20–51.2 yuan per ton, while in Gansu, Hubei, Anhui, and Jiangsu, prices dropped by 4.7–25 yuan per ton. Prices remained stable in the remaining areas. II. Performance of the domestic urea futures market Last week, the price of the main contract for urea futures declined slightly, while open interest and trading volume increased slightly. The main contract for urea futures, UR2005, opened at 1,711 yuan per ton and closed at 1,714 yuan per ton; the closing price dropped by 1 yuan per ton on a week-on-week basis, representing a decline of 0.06%. In terms of positions and trades, the weekly position volume was 52,800 lots, while the weekly trade volume was 135,300 lots. III. Supply Situation in the Urea Market 3.1 Urea Production Levels Last week, the production rate of urea manufacturers in China increased slightly. According to data from the Nitrogen Fertilizer Industry Association, as of December 31, 2019, the operating rate of urea producers nationwide was 57.99%, up 3.74 percentage points from the previous week and 8.05 percentage points year-on-year. Among them, the operating rate of urea plants that use coal as raw material was 68.44%, up 4.53 percentage points from last week and 7.00 percentage points higher on a year-on-year basis ； The operating rate of urea plants that use natural gas and coke oven gas as raw materials was 30.97%, up 1.70 percentage points from last week and 12.70 percentage points higher on a year-on-year basis. Last week, Jiangsu Hengsheng Parking Maintenance was added, with plans to resume operations in mid-January. Last week, the daily production of urea manufacturers in the domestic market increased slightly. According to data from the Nitrogen Fertilizer Industry Association, as of December 31, 2019, the national daily urea production volume was 129,500 tons, representing a week-on-week increase of 6.89% and a year-on-year increase of 8.34% ； Among them, coal-producing enterprises had a daily production volume of 110,200 tons, representing a week-on-week increase of 7.09% and a year-on-year increase of 2.16% ； The daily production volume of Qiti Enterprise was 19,300 tons, showing a week-on-week increase of 5.81% and a year-on-year increase of 65.61%. 3.2 Urea market inventory levels Last weekend, the inventory of urea at China’s major ports was 277,400 tons, down from 281,600 tons the previous week, a decrease of 4,200 tons. IV. Market demand for urea In terms of agricultural demand, it is currently the off-season; only winter wheat in regions such as Jiangsu and rice in some areas of the south have a certain demand ； However, due to the decline in urea prices earlier on, new order purchases by local distributors have increased slightly ； In terms of industrial demand, the operating rates of compound fertilizer and plywood factory enterprises are low; compound fertilizer companies rely mainly on orders received in advance, with few new orders being placed. V. Situation of urea raw materials Last week, the price of domestic anthracite remained stable. Affected by the environmental and safety inspections at the end of the year, some coal mines ceased operations, resulting in a slight reduction in the supply of anthracite, which provided some support for coal prices. However, there have been no significant fluctuations in the prices of mainstream coal in regions such as Shanxi and Henan, with only minor adjustments in prices in certain local areas. According to data monitored by the **Statistics Bureau, in late December 2019, the price of anthracite (Grade 2 washed medium lumps) was 1,068.3 yuan per ton, with prices remaining stable for the time being. With the Spring Festival approaching, the supply of coal will be affected; coal prices are expected to rise slightly in the upcoming period. VI. Performance of the international urea market: Last week, on December 27, India’s MMTC finalized purchases totaling 705,000 tons through a tender for urea. As a result, international urea prices saw a slight increase. Last week, the FOB prices of small-particle urea in the Black Sea, Baltic Sea, Croatia, Middle East, Brazil (CFR), Mexico (CFR), and India (CFR) increased by $1–10 per ton at the lower end and by $1–10 per ton at the higher end on a week-on-week basis, reaching 212–215 dollars/ton, 210–215 dollars/ton, 224–229 dollars/ton, 235–245 dollars/ton, 234–239 dollars/ton, 234–238 dollars/ton, and 255.2–258.48 dollars/ton respectively ； The FOB price of low-grade Chinese small-grain urea has dropped by $5 per ton, to $242–248 per ton. VII. Forecast for the urea market in the future Domestically, as the Spring Festival approaches, the operating rates of urea and compound fertilizer manufacturers will be restricted, leading to a slight reduction in supply ； New orders for compound fertilizers are weak, the operating rate remains low, and overall domestic demand for urea is insufficient. Internationally, India has issued tenders for 700,000 tons, which is below market expectations; moreover, the supply comes mainly from regions such as the Middle East, leaving limited opportunities for Chinese urea producers. According to a survey by the China Agricultural Inputs Distribution Association, the China Urea Market Index (CNCI) stood at 33.82 points on December 30, indicating that agricultural input companies are relatively pessimistic about the trend of the urea market in the next two weeks. Among them, the expected index for the average purchase price of urea, the expected index for the average selling price, the expected index for purchase volume, the expected index for sales volume, the expected index for inventory levels, and the expected index for business conditions were 35.29%, 38.24%, 38.24%, 32.35%, 29.41%, and 29.41% respectively – all below the 50% threshold – indicating that the market is generally bearish regarding the outlook for urea prices in the next two weeks. Based on the above, it is expected that urea prices will experience slight fluctuations and remain weak in the near term; attention should be paid to the situation in the winter storage market.