Chinese Urea Producers Receive a Timely Boost as Second Round of 2026 Export Quotas Nears 2 Million Tons

On May 27, China officially clarified the highly anticipated second round of urea export quotas for 2026. Centered around a total volume approaching 2 million tons, the introduction of government-set export floor prices, and a dedicated June-to-August export window, the policy not only exceeded conservative market expectations but also marked China’s return to the global urea market under an entirely new pricing framework after months of limited exports.

Total Volume Exceeds Expectations: Regular Quotas Plus G2G Incremental Allocation

According to major industry media reports, this round of urea exports consists of two parts: “regular quotas” allocated to mainstream producers and an additional “G2G special allocation” approved through government-to-government trade channels.

Regular quotas are estimated at 1.5–1.6 million tons, while an extra 400,000 tons has been approved under G2G arrangements. Combined, the total export volume is approaching 2 million tons, significantly higher than previous market expectations of 1.2–1.3 million tons.

Under China’s overall 2026 export framework, the Ministry of Commerce previously announced a total urea export quota of 3.3 million tons, including 2.97 million tons for state trading and 330,000 tons for non-state trading. This latest batch represents the second centralized allocation of the year and is specifically targeted for execution during the domestic off-season from June to August.

Leading producers including Yuntianhua, Hubei Yihua, and Luxi Chemical have reportedly received written notifications requiring customs declarations and shipment preparations to begin on June 1. All quotas will remain valid through August 31, after which unused allocations will automatically expire.

Pricing Mechanism Reshaped: China Introduces Official FOB Floor Prices

Beyond the quota size itself, the most disruptive aspect of the policy is its pricing mechanism. For the first time, China’s National Development and Reform Commission (NDRC) has formally established minimum export prices through official documentation, aiming to fundamentally change the previous pattern of aggressive low-price competition.

Industry analysts note that these floor prices are substantially higher than the previous export transaction range of USD 580–620/ton caused by aggressive undercutting among suppliers.

With current domestic ex-factory prices around RMB 1,800–1,850/ton, exporters are expected to secure profits of RMB 300–500 per ton. More importantly, higher-priced export orders are expected to provide reverse support for the domestic market during the seasonal slowdown, helping prevent prices from falling below the industry breakeven level of RMB 1,700/ton.

June–August Window Designed to Absorb Excess Supply

The timing of the policy reflects increasingly refined supply management by regulators.

The June-to-August period falls between the end of the spring planting season and the start of autumn sowing, traditionally regarded as the weakest demand window for China’s agricultural fertilizer market. Domestic agricultural demand typically declines by 40%–50% during this period, while producer inventory pressure rises sharply.

Current domestic urea production remains elevated at approximately 207,000–210,000 tons per day, creating an estimated surplus of 30,000–40,000 tons daily during the off-season.

A 2-million-ton export allocation would absorb roughly 650,000 tons of excess supply per month over the three-month period. This level of export demand could shift the domestic market from oversupply toward a tighter balance, providing support for stronger pricing during the seasonal low.

Market Sentiment Improves Immediately After Policy Announcement

The market reacted quickly to the policy announcement. On May 27, the UR2609 urea futures contract rose sharply, with intraday prices reaching RMB 1,904/ton. In the spot market, prices across major producing and consuming regions increased by RMB 20–40/ton, while trader restocking sentiment improved noticeably.

Over the next three months, concentrated export shipments are expected to ease inventory pressure and support producer order books. Several market institutions now forecast domestic urea prices could rebound toward RMB 1,900–1,950/ton under the combined support of export quotas and minimum pricing rules.

Risks and Variables Still Require Attention

Despite the strong policy support, several uncertainties remain. First, the implementation pace of the additional 400,000-ton G2G allocation remains critical. Any delay or reduction could limit the upside potential of the current rally.

Second, international pricing trends remain a major variable. China’s newly established export floor prices are currently well above some overseas market levels. If Indian tender prices weaken significantly, policymakers may face pressure to adjust the current framework.

Third, domestic supply security remains the ultimate policy red line. Regulators have reportedly emphasized that if domestic urea prices rise above RMB 2,000/ton, additional export approvals could be suspended immediately to prioritize national food security and fertilizer supply stability.

A Balancing Act Between Industry Relief and Domestic Supply Security

The latest urea export policy represents a textbook example of China attempting to balance domestic supply security with the need to support struggling industrial producers.

Through a combination of controlled export volumes, off-season shipment timing, and government-backed price floors, authorities have effectively reversed the previously bearish outlook for the sector’s seasonal slowdown.

For industry participants, the June-to-August period is not only a shipment window, but potentially the key profit recovery cycle for China’s urea industry in 2026.