This year’s urea price trend did not follow expectations, as it fell sharply during the peak season instead of rising. Particularly after mid-to-late June, when Shandong and Henan entered the corn top-dressing period—a time when urea demand typically spikes—the price of urea actually dropped further. The author believes that despite rising production costs and an unchanged overall fertilizer market environment, where other fertilizer prices are on the rise, this decline is mainly driven by weak market sentiment. Urea is expected to find its "mainstay" in the coming months.
Currently, a significant portion of urea ex-factory prices have fallen below 1,500 yuan per ton, with some reaching as low as 1,420 yuan. Market wholesale prices are also declining, hitting yearly lows. More concerning than the price drop itself is the deteriorating market psychology and the severe situation facing the industry.
Some manufacturers view urea as a "hot steamed bun"—they want to sell quickly regardless of the price. They believe that July and August are the last sales window for the year. If they still have inventory, it could turn into "winter urea," which is unacceptable. However, the market isn’t solely controlled by producers. Distributors and farmers are adopting a "buy high, not low" approach. As prices keep falling, dealers suffer losses when repurchasing, making them reluctant to buy. Farmers, too, are hesitant to purchase at higher prices if they can get it cheaper the next day. This creates a cycle: the more prices fall, the less people are willing to buy, leading to even lower prices.
This situation affects not just individual companies but the entire urea industry. Although urea production has increased rapidly this year, the supply-demand imbalance has worsened, and the price drop is somewhat normal. However, such a sharp decline during the fertilization season is abnormal. The overall fertilizer market environment hasn’t changed—grain prices have been rising steadily, and farmers remain highly motivated to plant, increasing their fertilizer usage. Other fertilizers like monoammonium phosphate and potassium chloride are also seeing price hikes, yet they continue to sell well.
From a cost perspective, coal and electricity prices this year are higher than last, pushing up the average production cost of urea. At current price levels, many companies are on the verge of losses. So why is this happening? The main issue lies in the lack of a "mainstay" in the urea market—no dominant company to guide the market. Participants often act impulsively, and when prices start to fall, panic sets in. Some sellers rush to offload inventory at any price, dragging others into the same behavior and driving prices down further.
Looking at the recent trends in the urea market, one key observation is that while the market has grown rapidly, it remains immature, especially in terms of market psychology. The extreme volatility of urea prices has a negative impact on stability and trust. It's time to address this issue.
The industry is now in a better position to resolve these challenges. After years of rapid development and consolidation, several large-scale companies have emerged. For example, Hubei Yihua Group produces over 3 million tons annually, while Lutianhua, Sichuan Meifeng, Hainan Fudao, Wuhua Petrochemical, Luxi Chemical, and others each produce over 1 million tons. Market participants hope that these leading companies will step up and play a "main nucleus" role, guiding the market toward healthier and more stable development.
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