Morning Insight: July 16,2026

Morning Insight:July 16, 2026 LinlinGaoCertification：Z0002332gaolinlin@gtht.comYu Chen WuCertification：Z0024232wuyuchen@gtht.com Main Body Urea:In the short term, although international urea prices have risenamid geopolitical tensions in the Middle East and China's urea exportshave gradually accelerated, the sharp seasonal slowdown in domesticagricultural demand has outweighed the increase in export demand. As aresult, the additional exports have been insufficient to offset weakerdomestic consumption, leading to a significant inventory build atdomestic urea producers and keeping urea futures under pressure. Near-term attention should focus on spot market transaction volumes, the paceof exports, and any further policy developments. From a longer-term perspective, at the quarterly horizon, urea remains apolicy-sensitive commodity due to its importance for food security. UnderChina's Food Security strategy, both ex-factory prices and exports aresubject to strict government regulation. Looking back at 2025, policyinterventions proved both timely and effective in influencing spot andfutures prices, meaning policy expectations continue to carry substantialweight in urea futures valuation. Following the current phase of strongerexports, the domestic urea market is still expected to remain relativelywell supplied in the second half of the year, with the overall pricecenter gradually trending lower. Overall, urea futures are expected totrade in a range in the near term, while the medium-to long-term outlookremains under pressure. Open Interest Source：iFind, GUOTAIJUNAN FUTURESResearch Source：iFind, GUOTAIJUNAN FUTURESResearch Source：iFind, GUOTAIJUNAN FUTURESResearch Source：iFind, GUOTAIJUNAN FUTURESResearch News Highlights: 1. China's yuan-denominated loans rose by 10.72 trillion yuan (about 1.58trillion U.S. dollars) in the first half of 2026, central bank datashowed on Wednesday. At the end of June, outstanding yuan loans stood at 282.63 trillion yuan,up 5.2 percent year on year, according to the People's Bank of China.The M2, a broad measure of money supply that covers cash in circulationand all deposits, had increased by 8 percent year on year to 356.71trillion yuan by the end of last month. The M1, which covers cash in circulation, demand deposits and clientreserves of non-bank payment institutions, reached 118.48 trillion yuanat the end of June, up 4 percent from a year earlier. Wednesday's data also revealed that outstanding aggregate financing forthe real economy stood at 462.06 trillion yuan at the end of last month,an increase of 7.4 percent year on year. Yuan deposits rose by 17.76 trillion yuan in the first half of 2026, withhousehold deposits up by 7.58 trillion yuan. China will continue to apply an appropriately accommodative monetarypolicy in 2026, this year's government work report noted. (Source:Xinhua) 2. China's electricity consumption increased by 5.3 percent in the firsthalf of the year, driven by strong growth in internet data services,electric vehicle charging and high-tech manufacturing, official datashowed on Wednesday.Total power consumption reached nearly 5.1 trillion kilowatt-hours (kWh)in the January-June period, according to data released by the NationalEnergy Administration.Power consumption in the tertiary sector rose 8 percent to 991.6 billionkWh, the fastest growth among the three major sectors of the economy.Electricity use by internet data services surged 44 percent from a yearearlier to 49.4 billion kWh, while consumption by electric vehicle charging and battery-swapping services soared by 56.9 percent to 81billion kWh in the first half of 2026. Wu Liqiang, an official with the China Electricity Council, saidelectricity demand from emerging industries continued to grow rapidly,with power consumption by internet data services in the first six monthsnearing the level recorded for the whole of 2024. This boom in AI applications has become an increasingly important driverof electricity demand. Industry estimates show that generating a five-second AI-produced high-definition video can consume as much electricityas fully charging 10 smartphones. Electricity consumption by China's high-tech and equipment manufacturingsector climbed 9.8 percent year on year to 600.8 billion kWh in the firsthalf of 2026, accounting for 24.3 percent of manufacturing power use, Wuadded. (Source: Xinhua) Guotai Junan Futures Co., Ltd. (hereinafter referred to as "the Company") is qualified to conduct investment consultingbusiness in the futures market, as approved by the China Securities Regulatory Commission (Approval No. [2011]1449). The views and information contained in this report are intended solely for the reference of the Company’s professionalinvestors. This report is not intended to target or violate any laws and regulations of any region, country, city, or other legaljurisdiction. Due to the difficulty in restricting access to this report, we apologize for any inconvenience