SunSirs: Excess Supply Continues to Restrict Urea Price Recovery

The current decline in the inventory of urea enterprises mainly reflects the transfer to downstream social inventory or the gathering at ports waiting for export, in fact, it has not been digested by the terminal market, and the total inventory of urea in China is still at a high level.

Recently, India announced its urea bidding plan, and the market expects that urea exports are likely to increase in the later period; in addition, the domestic order situation is still acceptable, and the decline in corporate inventory has supported urea prices. However, considering that the overall supply exceeds demand pattern in the market has not changed, and the industrial demand has declined, it is expected that the rebound space for urea prices is limited.

Starting load slightly down

Recently, due to the release of bidding information in India and the support of downstream orders, the price of urea has stopped falling and stabilized, with a slight increase in some areas. With the recovery of prices, the operating conditions of urea production enterprises have improved. As of December 18, the domestic profit margin for urea production using new coal gasification technology was about 150 CNY/ton, an increase of 15 CNY/ton compared to the previous month. However, the fixed bed process and natural gas process units with higher costs are still operating at a loss. As the year approaches its end, due to factors such as environmental inspections and insufficient orders, despite some repair of corporate profits, the production load of the urea industry has still decreased slightly. As of December 18, the domestic urea production load was 80.69%, an increase of 0.51 percentage points compared to the same period last year, but a decrease of 3.39 percentage points compared to the mid-November stage high. Currently, the domestic weekly urea production has fallen back to about 1.365 million tons. Although the supply has decreased slightly in the off-season for consumption, the overall still exceeds about 245,000 tons.

With the liberalization of urea exports, the domestic port inventory has significantly decreased, which has also accelerated the process of enterprises de-stocking. In the short term, the order situation of enterprises is good, and the inventory has decreased, driven by winter reserves and Indian bidding. As of now, the inventory of domestic urea enterprises is 1.18 million tons, which is still at a high level, but it has shown a downward trend. At the same time, the inventory of domestic urea port samples is 138,000 tons, which is at a low level, but due to the continuous concentration of export supplies at ports, the port inventory may gradually increase later.

Overall, the current decline in urea company inventories mainly reflects a transfer to downstream social inventories or a gathering at ports for export, rather than being digested by the terminal market, and the total domestic urea inventory is still at a high level.

Exports are expected to increase

At present, the profit of the compound fertilizer industry is still acceptable, but due to the impact of environmental protection patrols and insufficient orders, the enterprise inventory has accumulated and the production load has slightly decreased. The melamine industry has turned from profit to loss since December, and combined with the seasonal off-season impact, the production load has decreased significantly.

On December 16, 2025, the National Fertilizer Limited (NFL) of India issued a new round of urea import tenders, planning to purchase 1.5 million tons of urea. The tender deadline is January 2, 2026, the quotation validity period is until January 16, 2026, and the latest shipping date is February 20, 2026.

The author believes that the new round of bidding in India is expected to stimulate exports, which is also an important reason for the recent rebound in urea prices. With the relaxation of urea export policies and the continuous issuance of export quotas domestically, the oversupply of the urea market and the pressure of high inventories are expected to be alleviated. Data released by the General Administration of Customs shows that the cumulative export volume of domestic urea from January to November this year has reached 4.62 million tons, exceeding the level of 4.25 million tons in 2023.

Overall, the short-term urea price is expected to recover and rebound in the strong support zone of 1630-1660 CNY/ton, driven by factors such as the Indian bidding release, better market orders, and the decline in corporate inventory. However, considering that the supply exceeds demand pattern of urea has not changed, it is expected that the rebound amplitude of urea price will be limited to a large exte

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