By Wang Fei, Jinlian Chemical Co., Ltd.
Capacity change analysis
China’s total urea capacity in 2022 was 74 120 000 t/a. Domestic urea capacity fell initially and rose later from 2018 to 2022 (See Figure 1). Since 2018, China’s urea capacity has decreased due to dual controls on energy consumption, increasing cost, and technological development. From 2020, urea capacity has crept up, with a noticeable growth in 2021. Furthermore, urea capacity utilization has increased steadily since 2020, staying at 70% basically, as a result of a stable increase in domestic urea demand and exports, and national focus on grain production. Currently, China’s urea capacity is raw material-oriented, distributing in the concentrated areas of coal and gas, as well as major agricultural provinces.
Figure 1 Capacity changes comparison of China’s urea from 2018 to 2022
Output comparison analysis
When comparing domestic urea output over the last five years, it is clear that the output climbed up from 2018 to 2022, especially the first half of year with outstanding fertilizer peak season (See Figure 2). According to the survey, the average operation rate of China’s urea in 2022 was 71.81%, with daily output of 154 900 tons and total output of 56 601 400 tons, an increase of 5.18% year-on-year. One major reason is the urea output was affected by the launch of some new capacity and the resumption of long-term shutdown equipment in the second half of 2021 and in 2022. The second one is the national supply-guarantee policy, which requires fertilizer enterprises to make most of equipment. The third is that urea profits in 2022 were acceptable.
Figure 2 China’s urea output comparison from 2018 to 2022
Exports analysis
From 2018 to 2022, China’s urea exports, from 2 503 900 tons in 2018 to 4 944 600 tons in 2019, fell after rising (See Table 1), which represents a great leap. It is inseparable from the capacity increase of domestic urea and technological advance. And between 2020 and 2021, China’s urea exports remained high with 5 450 000 tons and 5 297 800 tons, respectively. However, the urea exports in 2022 dropped precipitously, which lied in the implementation of legal urea inspection policy, greatly hampering urea exports. Judging from comparison data, the year-on-year volume in a single month was mainly declining.
Data resource: General Customs Administration
Imports analysis
Between 2018 and 2022, China’s imported urea decreased progressively (See Table 2). And the dependence on foreign urea has declined gradually as a result of technological progress of domestic urea enterprises.
Data resource: General Customs Administration
The change analysis of downstream consumption
The downstream industrial demand for urea focused on compound fertilizer, urea-formaldehyde resins, melamine, thermal power denitrification, automobile urea, with compound fertilizer and urea-formaldehyde resins playing a leading role. In 2023, the planting area of agricultural food increased thanks to favorable national policies. Moreover, the equipment of compound fertilizer of prilling tower was newly added in Northeastern China, with a rise in regional urea demand. From 2018 to 2022, domestic urea consumption in downstream was generally stable (See Figure 3). Agricultural demand had a slight increase by 5 consecutive years, with the proportion of 46%, 51%, 52%, 52%, 54% respectively. The use of urea-formaldehyde resins decreased year by year with the proportion of 24%, 17%, 16%, 16% and 10%. While melamine didn’t change much, with the demand being at 7% to 8%. It is notable that automobile urea proportion increased yearly from 1% in 2018 to current 5%.
Future trend analysis
1. Capacity and process development of Chinese urea
In recent years, China’s urea capacity and output have had a positive growth, while that of coal and gas-based urea has diverged. Thanks to low cost, the dual growth of capacity and output for coal-based urea grew significantly. But restricted by national limited natural gas, the capacity and output of gas-based urea have maintained stable.
The process of coal-based urea: fixed bed gasification process is not widely used in practice. Serious pollution occurs during the process of fluidized bed coal gasification. And the more advanced technology is HT-L pulverized-coal gasification, which has adaptable raw coal, long operation cycle, high carbon conversion and lower emission and cost, but the initial investment is relatively large. Fix bed technology will be phased out as the process domestic coal-based urea develops.
The gas-based urea process: It is the lower gas cost that makes some enterprises in Northwest China have obvious price advantages. However, the gas price is relatively high in Southwest China, making the production cost lose the upper hand. Additionally, impacted by the cutback on gas in every winter, the operation of gas-based urea will start to experience a dramatic decline from late November to mid-December, with roughly one month of maintenance.
In the future, new projects approval in the coal chemical industry will be stricter, along with intensified competition. The suggestions for urea enterprises are as follows: First, eliminate outdated production capacity and upgrade technology. The second is to improve the utilization or self-sufficiency of the raw material and lower the unit production cost. The third is to control electricity and heat consumption, optimize energy structure, and reduce carbon emissions.
2. Urea price variations
Generally, national policies will continue to guide the fertilizer industry. Against the backdrop of ongoing legal inspection of urea exports, it is expected that the domestic urea supply and demand will not be so tight that the oversupply will last for a long time, and the market weakness will be more obvious. However, affected by the frequent urea price fluctuation, there is high risk of downstream storage, while the social storage continues to be low. Therefore, the urea industry still may keep upward with the positive market and the peak season of fertilizer usage. It is projected that in the next five years, the urea turnover may fall first and then rise under the influence of cost, supply and demand, and national policy regulation.
