BOABC: The Listing of Urea Futures Would Promote the Development of Industry Better

In early July, China Securities Regulatory Commission approved urea futures to be listed on Zhengzhou Commodity Exchange on August 9th. According to the information released by Zhengzhou Commodity Exchange, the exchange code of urea futures is UR; the trading unit is 20 MT/hand; the minimum price changes are 1 RMB/MT; the limit up and down is ±4%; the minimum guarantee is 5% of contract value; delivery methods are warehouse delivery and factory delivery; benchmarking delivery products are superior small and medium-sized urea for agriculture, and meanwhile, substitute premium is allowed.
 
Urea is a kind of fertilizer variety whose output is biggest. Urea capacity in 2018 was 69.54 million MT (product, same below); the output was 52.07 million MT; the exports were 2.443 million MT; most of the remaining was mainly for the demand from agriculture. According to the estimations, the consumption of urea for agriculture in 2018 was 32.99 million MT, taking up 63.36% in the total. Besides, influenced by a periodic demand, urea prices fluctuated frequently. In the last three years, the growths and declines in ex-factory prices of urea have been upward of 200 RMB/MT. Meanwhile, the pricing power is almost in the hands of producers, and midstream and downstream companies have weak ability to bargain.  
 
The listing of urea futures would offer service such as price discovery, risk mitigation and lock gain in advance to upstream and downstream companies and contracted companies; it also is helpful for guiding and optimizing the pricing model, and promoting the structure adjustment.