China Urea Granular Market Update: High Inventory Keeps Prices Under Pressure

China's urea market remained weak during the week of June 26-July 2, 2026. Domestic supply stayed high, factory inventory continued to rise, and downstream buyers remained cautious. In Shandong, mainstream small and medium granular urea ex-factory prices moved to around RMB 1,760-1,800/mt by July 2, while the Shandong Linyi market reference was RMB 1,800/mt. Using the working exchange-rate basis of USD 1 = RMB 6.8, these references are approximately USD 259-265/mt and USD 265/mt respectively. These are domestic market indicators and should be reconfirmed for current export quotations.

Key Takeaways for Overseas Buyers

For buyers sourcing Urea Granular, the main market signal is still inventory pressure. Chinese producers are willing to adjust offers to stimulate orders, but the speed of material moving from factories to downstream channels remains slow.

Export buyers should also watch international urea prices and China export policy details. The market has heard continuing discussion about export guidance, but short-term export volume has not yet shown a clear improvement. Until export demand becomes more visible, domestic oversupply is likely to keep price sentiment cautious.

Market Overview

Domestic urea prices moved in a narrow but weak range. Shandong Linyi fell from RMB 1,810/mt to RMB 1,800/mt, while Shandong Heze declined from RMB 1,800/mt to RMB 1,780/mt. Some regions were stable or slightly higher, but the overall market tone was still soft because supply remained abundant and buyer confidence was limited.

Related markets also showed pressure. The 2609 urea futures contract closed at RMB 1,714/mt, down RMB 22/mt, equivalent to about USD 252/mt. Synthetic ammonia in Shandong fell sharply to RMB 2,045/mt, while melamine and methanol also declined. Compound fertilizer in Shandong rose slightly, but this did not create strong support for urea procurement.

Supply and Inventory

China's weekly urea output was around 1.5036 million mt, only slightly lower than the previous week. Capacity utilization was around 90.03%, still a high operating level. Daily production remained close to 210,000 mt, and the next period may see production rise as more units restart than shut down for maintenance.

Factory inventory reached about 1.2003 million mt on July 1, up 66,700 mt from the previous period. Port inventory was about 152,900 mt, up 8,000 mt. The inventory trend shows that domestic supply pressure has not yet been absorbed by downstream demand or exports.

Demand and Export Market

Agricultural demand provided some seasonal support because June and July are a fertilizer-use period for field crops, and rainfall helped stimulate partial purchasing in several regions. However, this support was scattered and not strong enough to reverse the market. Industrial demand from compound fertilizer, board and other downstream sectors remained mainly need-based.

Internationally, urea prices continued to weaken, although the rapid decline seen since early May has slowed. As of June 26, FOB China small granular urea was reported around USD 410/mt, down USD 5/mt, while FOB China large granular urea was around USD 415/mt, down USD 30/mt. FOB Middle East small granular urea fell to around USD 370/mt. Brazil CFR references were broadly stable near USD 390/mt for small granular and USD 400/mt for large granular material.

International Factors

Geopolitical risk premium eased after the United States and Iran agreed to continue deeper talks and shipping conditions through the Strait of Hormuz gradually improved. As supply concerns moderated, international oil prices moved lower, which weakened broader commodity sentiment. The recovery of Middle East supply routes also reduced support for international urea prices.

Market Outlook

The next period is expected to remain range-bound but weak. Daily urea production is expected to stay high at around 213,000-225,000 mt, while industrial demand is not strong and agricultural purchasing is likely to become more scattered. Producers still need to reduce inventory, but traders are cautious about chasing higher prices.

The Shandong Linyi market is expected to move around RMB 1,750-1,800/mt in the next period, equivalent to approximately USD 257-265/mt using USD 1 = RMB 6.8. Buyers should watch factory inventory, downstream purchasing sentiment, futures prices and any concrete export-policy details.

RFQ Guidance

When requesting a urea quotation from China, buyers should specify product form, nitrogen content, packing, order quantity, destination port, shipment window, payment terms and document requirements. For fertilizer distribution or blending use, buyers should also confirm particle size, anti-caking requirement, COA review, bag marking and whether the shipment is containerized or bulk.

FAQ

Why is the China urea market still weak?

The main reason is high supply and rising factory inventory. Downstream demand is present but scattered, and export demand has not yet provided enough relief for domestic supply pressure.

What is the current Shandong urea price reference?

By July 2, Shandong mainstream small and medium granular urea ex-factory prices were around RMB 1,760-1,800/mt, equivalent to about USD 259-265/mt using USD 1 = RMB 6.8.

Is agricultural demand supporting prices?

Some agricultural demand exists because of seasonal field-crop fertilizer use, but procurement is scattered and not strong enough to change the overall weak market trend.

How is the international urea market affecting Chinese offers?

International urea prices remain weak, and buyer interest is cautious. This limits the ability of Chinese suppliers to raise offers and keeps export buyers focused on current confirmation rather than older price ranges.

What should buyers watch next week?

Buyers should monitor Chinese factory inventory, daily production, export-policy details, futures prices, international urea references and whether downstream purchasing improves after lower offers.