On the eve of the Spring Festival, the urea market faced several challenges due to heavy rain and snowfall, which disrupted shipments and caused coal supply shortages. Many manufacturers were forced to halt operations due to power cuts or insufficient raw materials. Additionally, the high export volume at the end of last year led to low inventory levels across the industry, with most companies holding minimal stock. As a result, domestic urea prices remained relatively stable, with manufacturers quoting the national maximum price of 1,725 yuan per ton.
However, after the Spring Festival, five key factors could push urea prices higher. First, international market prices for crude oil and natural gas—key inputs in urea production—are expected to stay elevated, increasing production costs. Rising ocean freight rates will further add pressure on urea prices globally. Second, the cost of energy resources like coal, electricity, and gas remains high, creating significant financial strain on fertilizer producers. Third, transportation costs have increased due to reduced railway and highway capacity caused by winter weather, which is likely to affect distribution and pricing.
Fourth, many production facilities have already cut output or shut down. In late January, shipping difficulties due to weather and logistical issues forced some companies in Hunan, Hubei, and Guizhou to reduce or stop production, leading to tighter market supplies. Lastly, exports are playing a bigger role. With domestic prices lower than international ones, Chinese urea has become highly competitive, especially in the Indian market, where rising prices in the Middle East and Russia make China’s offerings more attractive. This export demand is further tightening domestic supplies and supporting price increases.
Overall, with limited shipment activity around the Spring Festival and low stock levels among downstream dealers, the market is unlikely to see a price drop. However, the government's price cap policy means that most producers will be cautious about raising prices. That said, there's still a risk of some companies engaging in unofficial price hikes. While the price ceiling isn't new, its enforcement remains crucial to maintaining market stability. In the near term, the urea market is expected to remain largely stable despite these pressures.
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Ningbo Maixun International Trade Co., Ltd , https://www.nbmachinery.com