The price of urea in 2026 may show seasonal changes, with an overall wide range of fluctuations. The sufficient supply throughout the year will put pressure on the price, while the flexible adjustment of export policies will provide bottom support.

The price of urea in 2026 may show a wide range of fluctuations. Ample supply throughout the year will put pressure on the price, while the flexible adjustment of export policies will provide bottom support. In the first half of the year, agricultural demand is in the peak consumption season, and the price of urea may fluctuate and run strongly under the condition of a phased improvement in the supply and demand pattern. In the second half of the year, demand will enter the off-season, the pressure on the supply and demand side will increase, and the price of urea may gradually decline.

2026 will be a year with massive capacity expansion.

In 2025, the production capacity of the urea industry will expand steadily, and the supply pressure will be prominent. The new urea production capacity in 2025 is expected to be 4.4 million tons, with production mainly concentrated in the second and third quarters. Several sets of plants have been put into operation, including the 800,000 tons/year plant of Shaanxi Coal Chemical Industry, the 700,000 tons/year plant of Gansu Liuhua, and the 600,000 tons/year plant of Jiangsu Jinneng Hengsheng Chemical, etc. It is estimated that the domestic urea production capacity will reach 79.8 million tons in 2025, with a capacity growth rate of 5.83%.

2026 will also be a year with a large number of new urea plants put into production. According to incomplete statistics, there are still about 5.27 million tons of domestic urea production capacity to be put into operation, and the nominal capacity growth rate will be 6.60%. The supply side is expected to remain in a loose pattern.

The cost center of production is expected to move upward.

In 2025, the coal market showed an obvious trend of "first suppressing and then rising". In the first half of the year, coal prices continued their downward trend to hit a bottom; in the second half of the year, signs of the market stopping falling and rebounding appeared, and the price center gradually moved upward. Behind the change in the trend is the phased improvement of the fundamentals of the coal market: previously, the supply-demand relationship continued to be relatively loose, which became the core factor suppressing the decline of coal prices; later, affected by the intensification of policies such as safety inspections and overproduction verification, coal production tightened. Coupled with the long duration of high-temperature weather during the year, the demand for coal was released centrally during the peak summer period, and coal prices started a rising trend.

From the perspective of output, the production of mainstream coal mines has remained stable overall. Statistics show that from January to November 2025, the cumulative national raw coal output reached 4.4 billion tons, a year-on-year increase of 1.4%. However, the year-on-year growth rate has continued to narrow compared with the previous period, indicating a weakening momentum in output growth. In terms of imports, from January to November 2025, the total coal imports were 431.676 million tons, a year-on-year decrease of 12%, with a significant drop. The pattern of a decline in coal imports throughout 2025 has basically been confirmed.

The demand side still has strong resilience, and multiple factors together support the growth of demand. First, the high temperature weather lasted for a long time during the year, driving up the demand for coal used in power generation. Second, the expectation of a cold winter has increased, and the demand for power plants to replenish stocks for winter storage has been released in advance. Third, the rigid demand in non-electricity industries has operated steadily, providing basic support for coal demand.

Looking ahead to 2026, the coal supply is likely to remain stable, and the potential impact of policies still needs to be focused on. In terms of demand, due to the continuous expansion of the scope of new energy replacing traditional energy, the room for growth in coal demand will be limited. Overall, as the market supply and demand pattern gradually improves, the operating range of coal prices in 2026 is expected to move upward as a whole.

In the first half of 2025, coal prices fell significantly. Compared with 2024, the production costs of urea enterprises decreased. The cost advantages of urea from water-coal slurry and pulverized coal gasification enterprises were obvious compared with those from natural gas and fixed-bed enterprises. Although the profits of natural gas-based and fixed-bed enterprises were not as high as those of new coal chemical enterprises, they still had profits in their own cash flow, so the enterprises still had certain motivation to start production. In recent years, the newly put-into-production enterprises are mainly those using water-coal slurry and pulverized coal gasification technologies, and the proportion of such technologies has increased. Their costs are relatively low, and in the long run, this will promote the overall cost center of the urea industry to move down.

According to data from SteelUnion, as of December 26, 2025, the total cost of urea production using the fixed bed method was 1,917 CNY/ton, a decrease of 87 CNY/ton compared to the beginning of the year; the total cost of urea production using the coal water slurry method was 1,526 CNY/ton, an increase of 9 CNY/ton compared to the beginning of the year; the total cost of urea production using natural gas was 1,978 CNY/ton, a decrease of 5 CNY/ton compared to the beginning of the year.

In 2025, the domestic industrial gas prices broke the previous pattern of significant seasonal fluctuations, showing the characteristics of "a year-round decline with fluctuations tending to stabilize". Taking the southwest region as an example, the industrial gas price in 2025 slightly dropped from 2.27 CNY per cubic meter in the middle of the year to 2.24 CNY per cubic meter in the third quarter, and remained stable after rising in October, staying at a relatively high level throughout the year. This price rigidity is mainly due to the influence of the long-term agreement pricing mechanism. The contract price adjustment cycle for industrial users is relatively long, making it difficult to timely reflect changes in market supply and demand.

The possibility of an increase in the operating rate is low.

According to Longzhong Information data, from January to November 2025, China's urea output was 65.057 million tons, a year-on-year increase of 7.82%, hitting a new high for the same period in history. The annual output in 2025 is expected to reach 71.207 million tons. This significant growth is mainly due to the release of new production capacity and the improvement of the operating rate of existing facilities. The continuous capacity expansion process has provided a solid supply foundation for the market, keeping the supply side in a loose tone at the current stage and having a significant impact on market prices.

The overall operating rate of urea in the fourth quarter of 2025 declined, mainly due to the technical transformation and maintenance of fixed-bed units in Shanxi combined with the loss-related maintenance of some enterprises. As profits decreased, the operating rate of fixed-bed units showed a significant downward trend. However, the output loss caused by this part of maintenance was offset by the gradually released new production capacity, so the overall output remained at a high level.

From a process-specific perspective in 2025, the capacity utilization rate of coal-based production was higher in the first half of the year than in previous years, and in the second half, it was consistent with the level in 2024. However, the overall capacity utilization rate of natural gas-based production was lower than that in 2024, mainly due to the loss-making situation of profits.

In 2026, domestic production capacity will continue to increase, while production will maintain meager profits. This will dampen the enthusiasm of urea enterprises for production, and the overall operating rate is unlikely to rise further. It is expected that the operating rate in 2026 will be slightly lower than that of last year.

Downstream demand shows some differentiation

From January to November 2025, China's apparent consumption of urea was 59.858 million tons, basically the same as the same period last year. The downstream demand for urea is divided into agricultural and industrial demand: agricultural fertilization is the main downstream application, with direct agricultural fertilization and compound fertilizer demand accounting for 44.6% and 20.8% of the total demand respectively; the demand for urea-formaldehyde resin in industrial plates accounts for 16.0%, and the demand for melamine accounts for 6.8%.

The agricultural sector is the largest downstream demand market for urea. To support the implementation of the new round of the action to increase grain production capacity by 100 billion jin and the plan to improve large-area per unit yield, the central and local governments have intensively introduced supporting policies, with the core logic centered on the strategy of "storing grain in the land and storing grain in technology". Among them, the implementation of the "storing grain in the land" policy directly affects the demand scale and structure of urea through four major paths: the construction of high-standard farmland, the protection of black soil, the improvement of saline-alkali land, and the control of "non-grain use" of cultivated land.

The construction of high-standard farmland has promoted the increase in urea usage while improving grain yield per unit through the promotion of modern agricultural technologies such as integrated water and fertilizer management and soil testing-based formula fertilization. However, from the perspective of long-term development trends, as the construction process gradually advances, the driving speed of its demand for urea will show a slowing trend. From the perspective of construction progress and planning goals, the construction of high-standard farmland is in a stage of quality improvement and acceleration during the "14th Five-Year Plan" period, with a relatively fast construction growth rate.

The core goal of black soil protection is to restore and maintain soil fertility. Under policy guidance, the model of replacing part of chemical fertilizers with organic fertilizers is gradually being promoted. This trend will have a certain inhibitory effect on urea usage, leading to a partial reduction in demand.

The management of saline-alkali land is a key component of the strategy of "storing grain in the land". Its core approaches are cultivating salt-tolerant crops, promoting suitable agricultural models, converting marginal land into effective arable land, and thereby bringing clear marginal demand increments to urea consumption. According to the data from the third national land survey, there are about 500 million mu of saline-alkali land in China with development potential. The policy clearly states that by 2035, the cumulative newly added and transformed arable land will exceed 115 million mu. This process will continue to support urea demand in the next few years, but the pulling effect shows a dynamic attenuation characteristic - as the management progresses and soil fertility tends to stabilize, the dependence of per unit arable land area on urea will gradually decrease, and the demand curve will show a trend of being high in the early stage and low in the later stage.

The control over the "non-grain use" of cultivated land ensures that cultivated land resources are concentrated on grain production by clearing up illegal occupation of cultivated land (such as converting nursery land back to grain land), optimizes the utilization structure of existing cultivated land, and promotes the return of cultivated land that was originally used for non-grain purposes to the consumption field of agricultural materials such as urea, thus forming a structural support for demand.

Overall, the construction of high-standard farmland remains the core driver for the growth of agricultural demand for urea in the future. Combined with the partial reduction in demand brought about by policies such as black soil protection, it is expected that the annual compound growth rate of agricultural demand for urea will be approximately 4% in the future.

The seasonal patterns of crop growth determine that urea is produced throughout the year but consumed seasonally. The demand for urea varies across different seasons.

Generally speaking, there is a need for topdressing during the wheat regreening period in March and April, and the amount of urea used accounts for about 20% of the total annual agricultural usage. June and July are the peak seasons for crop fertilization, with urea usage accounting for approximately 50% of the total annual agricultural usage. In September and October, wheat needs to be applied with base fertilizer, and the amount of urea used accounts for about 20% of the total annual agricultural usage. In November and December, the demand for urea is at the lowest level of the year. In addition, due to the low price operation and the psychological impact of "buying when prices rise but not when they fall", downstream enthusiasm for early stockpiling is weak, and most of them maintain procurement based on actual needs.

The demand for urea in compound fertilizers is second only to that for direct fertilization, ranking second. The demand for urea in compound fertilizers also shows a seasonal characteristic where it is stronger in the first half of the year than in the second half.

From January to November 2025, the domestic output of compound fertilizers was 53.3705 million tons, a year-on-year increase of 5.54%, and the annual output is expected to reach 58.3959 million tons. The capacity utilization rate of the industry continues to show seasonal fluctuation characteristics, with production activities being deeply tied to the agricultural fertilization cycle: in the first quarter, the production is mainly high-nitrogen fertilizers to meet the subsequent demand for agricultural topdressing; in the third quarter, the focus is on the production of base fertilizers for wheat; and in December, it enters the stage of stockpiling base fertilizers for spring. It is worth noting that due to the overcapacity in the industry, the overall operating rate throughout the year is at a relatively low level. In the first quarter, the operating rate remained high because downstream fertilizer stockpiling enthusiasm was high and inventories continued to be destocked, while the operating rate in other periods was lower than the same period last year.

Looking ahead to 2026, the domestic compound fertilizer output is expected to maintain a slight growth trend, which will continue to support the demand for urea. The core supporting logic stems from the strong policy guarantee for food production. The 2025 Central Economic Work Conference clearly stated that we must strictly adhere to the red line of cultivated land, never relax our efforts in food production, and promote the prices of grain and other important agricultural products to remain within a reasonable range. These policies will continue to boost the demand for fertilizers in the agricultural sector and drive the steady growth of compound fertilizer demand.

In 2025, the industrial demand for urea was dragged down by the weak plate industry, making it difficult to see an increase. The core dragging factors were concentrated in the two major downstream fields of melamine and urea-formaldehyde resin.

From the perspective of melamine, the main downstream industries of melamine are panel finishing and paint coatings, which are closely related to the real estate industry. From January to November 2025, the domestic output of melamine was 1.4025 million tons, a year-on-year decrease of 3.54%. Affected by weak market demand, the production gross profit of melamine has been meager for a long time, and enterprises' willingness to start production has continued to decline.

In 2026, the melamine market will face a long-term game between the continuous release of production capacity and weak demand. The industry will enter a stage of normalized low profits, and the market situation will be difficult to improve.

Urea-formaldehyde resin (for wood-based panels) is the largest variety in wood processing and wood-based panel adhesives, and its demand is highly correlated with the prosperity of the real estate and wood-based panel industries. From January to November 2025, the cumulative year-on-year decline in national real estate completion area was 18.0%. The wood-based panel industry as a whole performed weakly, with the market lacking growth momentum, and its supporting role in urea demand was relatively weak.

By the end of 2024, the nationwide work of "converting liquid ammonia to urea" in thermal power plants was completed, marking the official end of the years-long policy-driven demand expansion cycle. At present, desulfurization and denitrification devices in China's thermal power industry have been fully popularized, and the technical route (with urea as the core) has basically been finalized. The driving effect of new renovation projects on urea demand has completely withdrawn.

Currently, the demand logic for urea in the thermal power denitrification field has undergone a fundamental change: demand growth no longer relies on policy-driven renovation projects, but has shifted to a rigid consumption model dominated by the dual factors of "newly added thermal power installed capacity + actual power generation". This is mainly reflected in the regular inventory replenishment demand during equipment operation. From the perspective of installed capacity data on the supply side, by the end of 2024, the national thermal power installed capacity was 1.44 billion kilowatts; from January to November 2025, the newly added installed capacity was 77.52 million kilowatts, with a cumulative growth rate of 5.4%. Considering the trend of energy transformation, the growth rate of thermal power installed capacity is expected to slow down significantly in the future, and the marginal contribution of new installed capacity to urea demand will be limited.

The expectation of an increase in export quotas still exists

At the end of May 2025, China explicitly lifted restrictions on urea exports and adopted a batch-based quota distribution model to regulate the export rhythm. As of November 7, 2025, a total of four batches of export quotas have been allocated, with a total volume of approximately 4.6 million tons, effectively alleviating the supply and demand gap in overseas markets. The quotas of each batch show differentiated distribution characteristics. The first batch, approximately 2 million tons, was distributed in a universal and decentralized manner; the second and third batches, 1.2 million tons and 800,000 tons respectively, were concentratedly inclined to gas-based urea enterprises; the fourth batch, about 600,000 tons, returned to the universal form, and both the timing and scale of issuance exceeded market expectations.

The fulfillment of the urea export policy in 2026 will become a core variable affecting the supply and demand patterns both domestically and internationally. From the perspective of domestic supply, the pressure from new production capacity put into operation in 2026 is significant, and relaxing exports and expanding the quota scale may become the most effective way to alleviate oversupply. It is expected that the export quota will further expand in 2026.

Prices will fluctuate widely in 2026

On the supply side, the scale of new domestic production capacity put into operation in 2026 will still be relatively large, costs will increase, the capacity utilization rate may remain high, and domestic supply will still be sufficient. On the demand side, agricultural demand will maintain steady growth, while the growth rate of industrial demand may decline. Export demand is expected to further increase on the basis of 2025. The growth rate of total demand may be lower than that of supply. Overall, urea will maintain a balanced supply and demand or a relatively loose pattern.

The price of urea in 2026 may show seasonal fluctuations, with an overall wide-range volatile trend. Ample supply throughout the year will put pressure on the price, while flexible adjustments to export policies will provide bottom support. In the first half of the year, agricultural demand is in the peak consumption season, and urea prices may fluctuate and run stronger under the condition of a phased improvement in the supply and demand pattern. In the second half of the year, demand will enter the off-season, pressure on the supply and demand side will increase, and urea prices may gradually decline.

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com