In the long run, the large exports in 2025 will significantly reduce the carryover inventory, and with the arrival of the agricultural demand peak season after the Spring Festival, urea still has the possibility to strengthen again.

Since the National Day holiday, the urea futures have maintained a volatile and strong trend, with the main contract 2601 generally rising by about 100 RMB/ton. Currently, the market has completed three rounds of switching: initially, trading was centered around the autumn planting logic, then it shifted to the expectation of export quota issuance, and at present, it focuses on the demand start-up of the dry storage. As time goes by, the supply and demand game in the urea market is gradually intensifying.

In 2025, the newly added production capacity of the urea industry exceeded 6 million tons, and the industry's highest daily output once approached 210,000 tons. However, after entering December, the gas - based urea plants gradually entered the shutdown and maintenance stage, and the daily output also declined accordingly. Currently, it has dropped below 200,000 tons. Referring to the maintenance rules of gas - based plants in previous years, the maximum decline in the industry's daily output during this round of maintenance will reach 20,000 tons. Based on this, it is estimated that the final daily output of urea may fall back to the range of 185,000 - 190,000 tons. From a theoretical perspective, supply contraction should have provided some support for the urea market. However, compared with the data of the same period in previous years, the current urea production is still at a significantly high level. The data shows that during the maintenance stage of gas - based plants in the same period last year, the daily output of urea remained at 172,000 - 185,000 tons. This means that after this round of maintenance, the industry's daily output will still be 10,000 - 20,000 tons higher than that of the same period last year. Against the backdrop of no significant increase in demand, the positive effect of the reduction in gas - based plants on the market will be greatly weakened.

The resumption of compound fertilizer production has become the core support logic for the new phase of the urea market. The latest data shows that the current production rate of compound fertilizers has increased to about 40%, an increase of more than 10 percentage points from the previous low point, and it is expected that its production rate will reach a temporary peak around the middle of December. In the short term, purchasing demand is still an important driving force for the market, but as the production rate peaks and falls later, this favorable factor will gradually disappear.

Since November, the demand for the light storage has gradually started, which is also one of the main factors supporting the current strong market. Its way of purchasing at low prices has solidified the bottom of the market. However, as time goes by and prices rise, the support of the light storage demand for prices is weakening.

Since 2025, domestic China has implemented a quota system for urea exports, with a total of four rounds of quotas issued throughout the year, totaling nearly 5 million tons. The issuance of each round of quotas has provided a certain support for the market, especially the fourth round of quotas issued in November, which became the main factor driving the rise in the market at that time. With the rise in prices, the spot market has gradually moved away from the previous low point, so the probability of continuing to issue quotas in December has decreased, and the short-term policy-related benefits have temporarily weakened. However, in the long run, exports will still be an important positive factor.

First, the release of the fourth-round quota further indicates that the export of urea no longer distinguishes between the off-season and the peak season, and the state will flexibly adjust according to the market price and the supply and demand situation, especially when the price drops to a low level, policy support may appear at any time. Second, the annual export volume of 5 million tons in 2025 will significantly reduce the year-end carryover inventory, which will help to alleviate the supply pressure when the fertilizer demand peak season comes in 2026. Therefore, although the short-term export rhythm may slow down, it still constitutes support for the market in the long run.

Overall, although there are factors such as maintenance on the supply side, it still remains at a high level compared with the same period last year. On the demand side, the demand for compound fertilizers is gradually reaching its peak, the support from off-season storage demand is also weakening, and with the suspension of short-term favorable export policies, urea is expected to face upward pressure in the short term. However, in the long run, a large amount of exports in 2025 will significantly reduce the carryover inventory. With the arrival of the peak season for agricultural demand after the Spring Festival, urea still has the possibility of strengthening again.

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