China Urea Granular Market Update: Guidance Price Lifts Offers Despite High Inventory

China's urea market moved lower before rebounding during June 12-18, 2026. A higher third-quarter guidance price improved sentiment and encouraged many producers to raise offers, but domestic demand remained limited and export support had not fully materialized. For overseas buyers, the market is balancing short-term policy sentiment against high inventory and sufficient supply.

Market Overview

Shandong Linyi urea reached RMB 1,850/mt on June 18, about USD 272/mt using the working exchange rate of USD 1 = RMB 6.8, up RMB 30/mt or 1.65% from the previous week. Shandong small and medium granular urea ex-works transactions were reported around RMB 1,800-1,840/mt, about USD 265-271/mt, while large granular material was around RMB 1,860-1,900/mt, about USD 274-279/mt.

The 2609 urea futures contract closed at RMB 1,812/mt, about USD 266/mt, up 0.61% week on week. Buyers looking for Urea Granular should note that the rebound was driven partly by guidance-price expectations and improved sentiment rather than a broad recovery in physical demand.

Guidance Price and Market Sentiment

The third-quarter guidance price increased by more than some market participants expected. This helped restore confidence after a weak start to the week, improved producer order intake and supported higher offers. However, prices became more resistant after the initial rebound because no additional export benefit was confirmed and downstream buyers remained cautious.

International energy sentiment also strengthened as uncertainty remained around the United States-Iran understanding and international crude oil prices moved higher. This provided a firmer commodity backdrop, but domestic urea fundamentals remained the main constraint on further price gains.

Supply and Inventory

China's weekly urea production was about 1.4907 million tons, down 13,100 tons or 0.87% from the previous week. Industry capacity utilization fell slightly to 89.25%, down 0.79 percentage points, but overall supply remained sufficient and daily production stayed near 210,000 tons.

Factory inventory increased sharply to about 1.0858 million tons, up 126,400 tons or 13.17% week on week. Port sample inventory remained around 149,900 tons. The factory inventory increase shows that earlier cargo movement and downstream consumption were not strong enough to absorb available supply, even though the guidance-price news later improved transactions.

Demand Conditions

Domestic agricultural demand remained between stronger application periods, while compound fertilizer producers mainly purchased for immediate requirements. Compound fertilizer operating rates fell to 32.02%, down 1.19 percentage points. In Linyi, compound fertilizer producers' daily urea consumption fell to about 810 tons, down 22.86% from the previous period.

By June 17, Chinese urea producers' average pre-sale order coverage declined to about five days, down 14.09% week on week. This reflected slow seasonal stocking, limited industrial purchases and uncertainty around export implementation. Regional agricultural demand may appear in stages, but it is not expected to provide continuous nationwide support.

International Market Signals

International urea prices moved sharply lower in the latest reported period. FOB China small granular urea was reported around USD 440/mt, down USD 115/mt, while FOB Middle East small granular urea was around USD 425/mt, down USD 110/mt. Brazil CFR large granular urea was reported near USD 440/mt.

China export-price guidance and the India tender caused rapid changes in international expectations. For importers, headline export news should therefore be treated cautiously. Actual allocation, inspection requirements, supplier commitments, shipment schedules and current international netbacks should be verified before confirming cargoes.

Costs and Related Markets

Coal costs remained firm. Urea producers reported higher delivered prices for both gasification coal and anthracite lump coal, keeping production costs under pressure. New coal gasification urea gross profit was estimated at RMB 209/mt, about USD 31/mt, down 12.55% from the previous week.

Related markets were mixed. Shandong synthetic ammonia rose to RMB 2,150/mt, about USD 316/mt, while compound fertilizer 45%S remained at RMB 3,420/mt, about USD 503/mt. Melamine averaged RMB 5,620/mt, about USD 826/mt, while methanol in Changzhou fell to RMB 3,040/mt, about USD 447/mt.

Buyer Considerations

For overseas buyers, the current rebound may lead to firmer short-validity quotations, but high factory inventory and weak domestic demand still limit the fundamental upside. Buyers should distinguish between policy-driven offer increases and confirmed export cargo availability.

Before requesting a quotation, buyers should specify grade, particle size, nitrogen content, biuret requirement, quantity, packing, destination port and preferred shipment period. All market figures should be reconfirmed because guidance details, international prices and export execution can change quickly.

Short-Term Outlook

The short-term China urea market may remain firm but volatile. Daily production is expected to stay around 210,000-222,000 tons, while agricultural and industrial demand is likely to remain scattered. The higher guidance price may continue to support sentiment and encourage replenishment after low-priced stocks are consumed.

The main factors to watch are factory inventory, compound fertilizer operating rates, futures movement, downstream stocking and detailed export implementation. If export execution improves and inventory begins to fall, prices may hold the higher range. If policy support is not converted into physical demand, the market may return to consolidation.

FAQ

Why did China urea prices rebound this week?
Prices rebounded after a higher third-quarter guidance price improved sentiment, producer order intake and downstream replenishment activity.

Are China urea fundamentals strong?
Not fully. Supply remains sufficient, factory inventory increased sharply and domestic demand is still scattered and need-based.

What is the main risk for overseas buyers?
The main risk is treating policy-driven price sentiment as confirmed export availability. Buyers should verify allocation, inspection, shipment and current international pricing.

What information is needed for a Urea Granular quotation?
Buyers should provide particle size, nitrogen content, biuret requirement, quantity, packing, destination port and preferred shipment period.