Since the beginning of January 2026, urea futures have exhibited a pattern of wide fluctuations. Prices initially rose overall in January before entering a period of consolidation, influenced by factors such as slower-than-expected restarts of gas-based production units, pre-holiday stockpiling demand from downstream users, and volatility in international energy prices. On February 6, the UR2605 contract closed at 1,776 yuan per ton. Domestic urea spot markets rallied across the board, with prices in major production regions increasing to varying degrees. As of February 6, the mainstream price for small-particle urea in Henan was reported at 1,760 yuan per ton, up 40 yuan from early January; in Shandong, the price reached 1,780 yuan per ton, an increase of 60 yuan; and in Jiangsu, it stood at 1,790 yuan per ton, also rising by 60 yuan.
Internationally, urea prices also climbed. The FOB price for small-particle urea in the Middle East reached $474 per ton, up $76.5 from early January. In Brazil, the CFR price was $447.5 per ton, increasing by $42.5. The FOB price at Yuzhny port in Ukraine rose to $407.5 per ton, up $50, while Chinese small-particle urea FOB prices reached $442.5 per ton, a gain of $42.5. Strong agricultural demand in India, coupled with declining domestic urea inventories, contributed to the upward trend. Meanwhile, production cuts in Iran due to restricted natural gas supply during winter are expected to persist until March. China's urea exports, however, remain limited by the quota system.
On the supply side, domestic urea production remains relatively high. Latest data show that the operating rate of urea facilities reached 89.14%, up 5.86 percentage points from early January. Daily production averaged 209,900 tons, an increase of 13,900 tons. This is largely due to the gradual restart of gas-based units in southwestern regions, ensuring stable supply. By production process, coal-based urea units operated at a capacity utilization rate of 96.21%, with daily output of 177,500 tons; gas-based units ran at 63.54%, producing 32,300 tons per day. Although some companies began pre-holiday maintenance as the Spring Festival approached, the overall impact was limited, and supply remained ample.
In terms of demand, agricultural needs are gradually picking up. The initial stage of fertilizer preparation for winter wheat regrowth has begun, with demand increasing in major producing areas like Jiangsu and Anhui, leading to localized procurement activity. Inventories among downstream enterprises and distributors in regions such as Hebei, Guangdong, and Guangxi have risen somewhat, indicating improved stocking enthusiasm. However, high urea prices and cost considerations among farmers have resulted in a generally cautious procurement pace, without concentrated buying. Demand is expected to be steadily released, with a seasonal peak anticipated in March as temperatures rise and regrowth fertilizer application intensifies.
Industrial demand has also shown marginal improvement. As of February 6, the operating rate for compound fertilizer facilities was 41.79%, up 4.62 percentage points from early January and 15.45 percentage points year-on-year. This steady increase is attributed to pre-holiday stocking plans and the gradual startup of high-nitrogen fertilizer production, boosting rigid demand for urea. However, compound fertilizer producer inventories reached 749,500 tons, up 54,300 tons from early January but down 178,200 tons year-on-year, indicating cautious procurement. Further increases in operating rates may sustain urea demand, though inventory pressure could temper buying enthusiasm. Melamine unit utilization rates stood at 57.95%, up 3.6 percentage points from early January but down 7.73 percentage points year-on-year. Output reached 30,200 tons, a slight increase, supported by modest recovery in downstream panel industry demand. However, with panel factories largely shut for the holiday, the boost to urea consumption remains limited.
On exports, China's cumulative urea exports in 2025 reached 4.895 million tons, a significant increase. Policy shifted from strict restrictions to a managed system combining quotas and guided pricing. Exports were low in the first quarter to ensure spring ploughing supplies but entered a peak period from July onward. On February 7, India's RCF issued a new urea purchase tender, set to close on February 18 with shipment by March 31, targeting 1.5 million tons. This may further lift international prices and bolster domestic market sentiment. However, China's fertilizer supply protection policies and quota management mean that even with export profitability, actual shipments may not surge if policies tighten to secure domestic spring ploughing supplies. After positive factors are digested, trading may revert to fundamentals.
Inventory levels remain within a reasonable range without significant pressure. Producer inventories totaled 918,500 tons as of the week ending February 6, down 103,700 tons from early January and 827,400 tons year-on-year, reflecting continued destocking. This is driven by recovering domestic demand, increased procurement by compound fertilizer producers and distributors, and accelerated shipments ahead of the holiday. Port inventories reached 165,000 tons, up 25,000 tons from early January, due to a lack of new export orders after earlier quota-fulfilled shipments were completed, coupled with some import arrivals. However, overall port inventory remains manageable and is expected to decline with future quota allocations and international demand. Downstream inventories showed regional replenishment, with increases in Hebei, Guangdong, and Guangxi, as enterprises and distributors stockpiled in anticipation of post-holiday demand recovery, alleviating some supply-side pressure.
Cost structures varied by production process, but overall profitability improved significantly from early January. Coal-water slurry gasification units saw production costs at 1,507 yuan per ton, up 21 yuan, with profits of 263 yuan per ton, as urea price increases outpaced cost rises. Fixed-bed units benefited from lower coal costs, with production costs at 1,708 yuan per ton, down 203 yuan, and profits of 82 yuan per ton. Gas-based units remained loss-making, with costs at 1,978 yuan per ton and losses of 208 yuan per ton, though losses narrowed slightly due to higher urea prices. Domestic thermal coal markets were stable but soft, with supply and demand both weakening as the holiday approached, suggesting coal prices may fluctuate.
In summary, urea futures have experienced wide swings after early-year gains. Supply-side capacity utilization continues to rise, with output increasing steadily. Agricultural demand is in its initial stages, set to peak in March; compound fertilizer demand is recovering, while melamine demand is weak. Exports face short-term pressure. Inventories are structurally adjusting, with producer destocking and downstream replenishment keeping overall levels reasonable. Cost support is stable for coal-based units, while gas-based units remain in loss-making territory. Overall profitability has improved, supporting production incentives. With restarted units boosting output and agricultural demand not yet fully activated, a supply-demand easing pattern persists, limiting upward momentum. However, producer inventories are at moderate levels, and with agricultural demand expected to pick up in March, supply pressure may ease. For reference only.