Geopolitical tensions push overseas fertilizer prices higher, while urea futures remain in low-end consolidation

Urea opened higher today and continued to rise, showing a relatively strong and volatile trend during the day. Domestic demand remains weak, and spot prices have continued to decline. Urea factory ex-factory prices in Hebei, Shandong, and Henan provinces mostly range between 1,710 and 1,770 yuan per ton, with limited transactions at higher price levels. Current daily production is significantly higher year-on-year, and urea output is expected to increase further next week, as shutdowns and resumptions of operations occur simultaneously. Next week, two plants are expected to shut down while four others will resume production. Downstream purchases are mainly driven by agricultural demand. After widespread rainfall across most regions last week, procurement activity increased slightly. Meanwhile, raw material prices for compound fertilizer factories have remained stable recently, continuing to fluctuate at high levels. This provides moderate cost support for finished product prices. As of July 10, the operating rate of compound fertilizer plants stood at 29.8%, down 1.96% month-on-month and 0.03% lower than the same period last year. 
With high input costs and weak downstream procurement, most factories have not resumed operations. Both finished goods and raw material inventories are on an upward trend. Going forward, factories are expected to focus primarily on pre-orders for autumn fertilizers. As agricultural demand progresses, production capacity utilization will rise, further increasing urea demand, which remains relatively resilient compared to other industrial demands. On the melamine side, demand has been hampered by weather conditions in southern China, leading to sluggish sales. Factories are resorting to price cuts to attract orders, and capacity utilization is expected to decline next week. 
Stockpiles continue to rise, but the pace of accumulation has slowed this period, primarily due to smooth downstream procurement. On one hand, trading sentiment remained positive following last week's export meeting that boosted prices; on the other, recent rainfall has increased agricultural demand. Accumulation is expected to continue next week, though at a further reduced rate. Shipping through the Strait of Hormuz has been disrupted again, pushing international fertilizer prices higher. However, global demand remains modest and domestic exports remain sluggish. If Indian tenders stimulate the market, prices could see a significant rebound. Otherwise, relying solely on domestic demand, prices are likely to remain range-bound at low levels, consolidating the bottom.