This year's urea price trend has been quite unexpected, as it did not rise during the peak season but instead fell sharply. Especially after mid-to-late June, when Shandong and Henan entered the corn top-dressing period—typically a time of high urea demand—the price actually accelerated downward. The author believes that despite rising production costs and an unchanged overall fertilizer market environment, with other fertilizer prices increasing, this drop is mainly due to weak market sentiment. Urea market participants are now hoping for a “mainstay†to stabilize the situation.
Currently, a significant portion of the ex-factory urea price has dropped below 1,500 yuan per ton, with some as low as 1,420 yuan. The wholesale market has also seen a continuous decline, reaching the lowest point of the year. However, the issue isn’t just about lower prices—it’s the deteriorating market sentiment and the increasingly severe conditions. Some manufacturers see urea as a “hot steamed bun,†rushing to sell quickly regardless of price. They believe July and August are the last sales window, and holding inventory could turn into “winter urea,†which is unacceptable.
But the market isn’t controlled solely by producers. Distributors and farmers are adopting a “buy high, not low†strategy. As prices continue to fall, dealers lose money when they repurchase, so they avoid buying. Farmers, too, hesitate to buy today if they bought it yesterday at a higher price. This creates a vicious cycle: falling prices lead to less buying, which further drives prices down. This situation harms not only individual companies but the entire urea industry.
Although urea production has increased rapidly this year, the supply-demand imbalance has worsened, leading to a price drop. However, such a sharp decline during the fertilizer usage season is abnormal. The overall fertilizer market hasn’t changed—grain prices have been steadily rising, and farmers’ planting enthusiasm remains strong, leading to increased fertilizer use. Prices of other fertilizers like monoammonium phosphate and potassium chloride have also gone up, yet they still sell well. Additionally, with coal and electricity prices higher than last year, the average production cost of urea has increased, putting many companies on the brink of losses.
So why is this happening? The main reason is the lack of a “mainstay†in the urea market—no major players guiding the industry. Market participants often act impulsively. When prices dropped during the peak season, some panicked and sold at low prices, triggering a chain reaction. This led to a broader market collapse.
Looking at recent trends, one key observation is that while the urea market has grown rapidly, it remains immature, especially in terms of market psychology. Volatile prices cause significant negative impacts. It’s urgent to address this issue.
The industry is now better positioned to solve this problem. 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 these leading companies will act as a “main nucleus,†guiding the market toward stability and healthy growth after the recent volatility.
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