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Zhengzhou Commodity Exchange Expands Delivery Areas for Urea Futures to Jiangsu and Hubei Author/Source: Shanghai Securities News Date: February 24, 2022 Clicks: 18 On February 23, the Zhengzhou Commodity Exchange announced that it would expand the delivery areas for urea futures to Jiangsu and Hubei provinces, in addition to the existing delivery areas in Henan, Hebei, Shandong, and Anhui provinces. The exchange is also seeking designated warehouses for urea delivery in order to further broaden the scope of services related to urea futures and strengthen its ability to ensure a stable supply of fertilizers by means of these futures contracts. Since its launch in 2019, urea futures have operated steadily, with industrial clients gradually participating in the market. Since the first delivery of urea futures in January 2020, 21 deliveries have been successfully completed, equivalent to 250,000 tons of physical goods, with the delivery process proceeding smoothly. Affected by factors such as rising raw material costs and international urea prices, domestic urea prices have experienced greater volatility in recent years. The need for risk mitigation within the industry has increased significantly; many urea manufacturers located outside traditional delivery areas have begun to use futures contracts for basis trading, thereby raising their demand for deliveries. At the initial stage of the launch of urea futures, the Zhengzhou Commodity Exchange determined, based on the conditions of spot market circulation, the four provinces of Henan, Hebei, Shandong, and Anhui as the delivery areas, where production and consumption of urea are relatively concentrated and price differences remain stable; these provinces account for 38.2% of the country’s total production capacity. With the continuous development of the urea industry, a relatively stable supply and demand balance along with a mature spot market have also created favorable conditions for the expansion of delivery areas. It is understood that Jiangsu and Hubei provinces have a solid foundation in terms of available urea supplies, and trade flows with existing delivery areas are stable, with strong price correlations. Expanding the urea delivery areas to Jiangsu and Hubei not only facilitates local and nearby industrial enterprises to participate in deliveries more conveniently, meeting their needs for risk management, but also helps reduce the impact of unexpected situations such as pandemics or disruptions in logistics on these enterprises. This further enhances the role of urea futures in ensuring supply and stabilizing prices, as well as in supporting the stable development of the urea industry. A relevant official from the Zhengzhou Commodity Exchange said that in the next step, the work of adding more delivery warehouses will be completed in a timely manner, so as to fully leverage the role of futures delivery warehouses as a \"stabilizing force,\" and continuously expand the scope and quality of futures services for industries and the real economy.