Clouds of Uncertainty Loom Large Over European Urea Amid Low Production
- 26-Sep-2022 6:25 PM
- Journalist: Patrick Knight
In Europe, the manufacturing of Urea has been recently hindered since several facilities have shut down or entered maintenance. European Urea production is falling due to continued high Natural Gas costs and warehouses filled with imports. However, many facilities throughout Europe are about to resume operations, but nothing is certain; they are only expectations.
Prices for Natural Gas had decreased since mid-August when they reached heights of nearly 100 mm, but they are still unfavorable for the production of Urea. For Urea production to be economically viable, natural gas prices must drop by at least 20 to 30 USD more. Over 70% of the production reduction caused by plant outages at the moment can be attributed to Europe. Urea production remains constrained due to the volatility in Natural Gas prices.
Despite price declines in some countries brought on by a lack of demand in major import hubs like the US and Brazil, the outlook for the Urea market is stable to positive. India was the sole market to express interest in a recent European deal to purchase Urea. Due to China's continued absence from the market, exports are still quite low. Producer pricing should be supported by Chinese export restrictions and a dearth of European production activity.
Nitrogen production, the upstream source of Urea, has been severely curtailed. Buyers are hesitant because they are unaware of the market situation. All of these causes are increasing the Uncertainty in the Urea market throughout the nation.
Due to all of these considerations, the number of consumers of Urea in the nation is increasing. However, it appears that the market is quiet.
Given that the market appears illiquid, the upcoming weeks will be critical for European Urea. There may be some hope if Brazil's Urea demand returns and it begins purchasing Urea from Europe as demand increases.