Entering late January 2026, the domestic urea market commenced amid supply-demand dynamics.

With the Spring Festival approaching, prices demonstrated strength driven by order support and stockpiling demand, with localized quotations again testing the critical 1,800 RMB/ton threshold.

Data indicates that as of January 29, 2026, domestic urea spot prices have risen across the board, with ex-factory quotations in multiple regions generally adjusted upward by 10-30 RMB/ton. Market transaction activity has noticeably intensified, with some manufacturers reporting sufficient backlogs extending even beyond the Spring Festival, leading them to halt new orders. Notably, some Jiangsu-based manufacturers raised their ex-factory quotes for small- and medium-grain urea to 1,810 RMB/ton, breaking through the 1,800 RMB/ton threshold and setting a new multi-month price peak.

So, is this surge a temporary supply-demand mismatch or a signal of shifting industry fundamentals?

Short-Term Support: Robust Orders and Regional Price Holds

What factors underpin the current urea market strength?

Industry insiders reveal that the current market strength stems primarily from the concentrated release of short-term supply and demand factors. On the supply side, enterprises have ample backlogs of pending orders, with some manufacturers' orders extending beyond the Spring Festival. Some have even halted sales to support prices, providing solid backing for price stability. Simultaneously, as the pre-holiday stockpiling window narrows, downstream compound fertilizer plants and agricultural distributors are accelerating their restocking efforts, further boosting market activity. Convergence of short-term supply and demand factors.

Cost support remains equally significant. Although coal prices have retreated from earlier peaks, they remain relatively elevated overall. The full cost of fixed-bed production typically exceeds CNY1,700 per ton, with the cost line providing a floor for spot prices. Amid this convergence of factors, mainstream regional quotations have steadily risen, fueling heightened bullish sentiment in the market.

Long-Term Constraints: Overcapacity and Export Uncertainties

Does this price surge imply urea prices will remain firm before the holiday? What other variables exist?

Industry insiders note that pre-holiday market conditions face volatility risks. In other words, while the short-term urea market currently shows strength, sustained significant price increases face clear constraints. The core contradiction lies in normalized overcapacity and export dependency.

Supply pressure will intensify further. According to statistics from the China Nitrogen Fertilizer Industry Association, domestic urea production capacity is projected to exceed 73.8 million tons by 2025, with output expected to surpass 72 million tons. However, total domestic demand is estimated at only around 65.5 million tons, leaving nearly 6.5 million tons of surplus capacity that urgently requires export channels for absorption. Furthermore, planned new capacity additions for 2026 are still expected to exceed 7 million tons, indicating that supply pressure will only increase.

Demand growth remains relatively weak. Analyses from the China Nitrogen Fertilizer Industry Association and related sectors indicate that by 2025, domestic agricultural urea demand will be approximately 42 million tons, with non-agricultural demand around 23.5 million tons. Total demand will only reach 65.5 million tons, creating a significant gap compared to production levels.

Industry insiders indicate that agricultural demand is expected to stabilize at only marginal growth, while industrial demand for products like wood panels faces limited recovery due to the real estate sector's downturn. Consequently, overall domestic demand struggles to absorb the rapidly expanding urea production capacity.

Therefore, exports are destined to become the “key variable” influencing urea price fluctuations in 2026. Should export policies remain unchanged or fail to ease beyond expectations, domestic supply surplus pressures will intensify, exerting downward pressure on prices in the long term.

Additionally, policy intervention risks persist. As a critical agricultural input, urea price fluctuations remain under close policy scrutiny. Should prices surge too rapidly and breach policy “warning thresholds,” relevant authorities may intervene through measures like releasing reserves or adjusting export policies. Previous instances of rapid price corrections following spikes reflect this high policy sensitivity.

From a timing perspective, with only about two weeks left before the Spring Festival, actual transactions will slow as logistics operations gradually cease, limiting further price gains due to weakening demand momentum. Currently, producers show little willingness to cut prices before the holiday. The market is likely to maintain a high-range oscillation pattern before the festival, with prices in some regions potentially fluctuating between 1,750-1,820 RMB/ton. However, sustaining prices at these levels will be challenging. Post-holiday market dynamics will hinge on actual agricultural fertilizer application patterns and, most critically, export policy developments.

Overall, short-term urea prices are more likely to rise than fall, supported by order backlogs, with localized high prices potentially testing the 1,800 RMB/ton threshold before the holiday. However, constrained by the fundamental overcapacity, weak domestic demand growth, and uncertainties in export policies, sustained upward momentum remains limited. The probability of prices firmly breaking above this threshold before the holiday and establishing a trend-based breakthrough is low. The medium-to-long-term trajectory of urea prices will be highly dependent on the smoothness of export channels. Market participants are advised to view the short-term rally rationally and closely monitor policy shifts and global market developments.

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