In June 2026, China's urea export policy experienced a period of dramatic fluctuation. At the beginning of the month, the export guidance price restriction was lifted, only to be replaced by a new guidance price a few days later. This seemingly contradictory policy adjustment is underpinned by profound market logic and regulatory considerations.
Urea:
I. Policy Background: From "Strict Control" to "Loosening Restrictions"
In the first half of 2026, the domestic urea industry maintained a high supply situation, with daily output consistently above 210,000 tons, the highest level for the same period in history. During the spring planting season, the policy prioritized "supply assurance and strict control of outflows," suspending new export inspections in March and April, resulting in a significant contraction in exports. After the spring planting season, the market entered the traditional off-season, and companies began to experience inventory pressure. Therefore, at the end of May, urea export quotas were officially implemented, amounting to nearly 2 million tons, with an implementation window from June to August; combined with the batches already issued in the first quarter, the total export quota for 2026 is 3.3 million tons.
However, after the quotas were issued, extremely high export guidance prices were set—no less than $660/ton FOB for small granular urea and no less than $670/ton for large granular urea. These prices were far higher than the international market prices at the time, leaving companies with no profit margin for exports, and actual exports virtually stagnated. Export channels became ineffective, and quotas were difficult to implement.
II. Removal of Price Limits: Market Reactions and Concerns
On the evening of June 6th, the China Nitrogen Fertilizer Industry Association issued a notice officially removing the export guidance price restrictions on urea, allowing companies to set prices flexibly based on international market prices. The policy immediately boosted market sentiment. However, problems arose. With the removal of price limits, the international market worried that a large influx of low-priced Chinese urea would flood the market, causing price chaos. At the same time, the domestic agricultural market was in its off-season; if disorderly bidding and dumping occurred on the export side, it would not only disrupt international market order but could also backfire on the domestic price system.
III. Restoring Guidance Prices: Three Considerations
Based on the aforementioned risks, relevant departments acted swiftly after lifting price limits, setting new export guidance prices. For large-volume orders outside of India, the price for small urea particles is tentatively set at no less than $430/ton FOB, while the price for automotive and large urea particles is tentatively set at no less than $440/ton.
Firstly, it prevents disorderly competition and protects industry interests. Exports without a price floor can easily trigger vicious price wars among companies. Setting guidance prices effectively establishes a "bottom line" for the industry, preventing companies from sacrificing profits to compete for orders.
Secondly, it balances domestic and international markets and ensures domestic supply. China is both the world's largest urea producer and a major agricultural consumer. If export prices are too low, forcing companies to sell at a loss, it will in turn force domestic spot prices to decline accordingly, compressing the profit margins of producers and even triggering concentrated maintenance shutdowns of equipment, ultimately affecting the supply capacity during the subsequent peak season. The existence of guidance prices essentially establishes a "firewall" between export profits and domestic supply assurance.
Thirdly, it stabilizes market expectations and avoids drastic fluctuations. Following the removal of price controls, international urea prices plummeted by approximately $100 per ton in a single day, with Indian tender prices nearly halved. This weakened China's pricing power in the urea market, a significant external factor contributing to the reinstatement of price controls. Such dramatic policy fluctuations impact the entire industry chain. Dynamically adjusting guidance prices addresses the reasonable export demands of enterprises while providing clear price signals to the market, thus contributing to the stable operation of the industry.
