In the Face of Strong Upstream Values, Urea Retained its Previous Trend
- 27-Apr-2022 5:33 PM
- Journalist: Xiang Hong
Since the first quarter of 2022, Urea prices have been steadily climbing across the globe. According to the ChemAnalyst database, a significant increase in the Urea Price was observed because of high Natural Gas value coupled with supply chain constraints. Furthermore, the product's market fundamentals remained solid as seasonal offtakes in the forthcoming Kharif season improved dramatically.
With rising feedstock and energy prices, Urea manufacturers have struggled to keep up production. As Ukraine is a large producer of Ammonia, the factory closures in the country amidst the war have resulted in the European crisis. According to some market participants, a lack of Ammonia substantially impeded Urea manufacturing. A rise in raw material costs and consistent offtakes from the downstream agriculture industry drove these increments. Furthermore, the Russia-Ukraine conflict has significantly impacted global market dynamics, making investors concerned about future trade activity and profit margins. In addition, the rate of price increases slowed in April, as several other factors influenced regional Urea pricing patterns.
Due to strong demand and tight global supply fundamentals, upstream Ammonia prices have resurrected in Europe and show no signs of abating. One of the most important precursors to Urea is Ammonia. Meanwhile, rising electricity costs, limited supply of energy feedstocks such as LNG, and increasing upstream prices have driven up production costs. According to the ChemAnalyst database, Urea prices in China were assessed at USD522/MT FOB Qingdao in the week ending 15th April.
The fertilizer review committee has been notified that the country may face a shortfall of 200,000 tonnes of Urea during the peak Kharif planting season. According to one of the government probes in Islamabad, an import summary will be filed before June to bridge the demand gap.
As per ChemAnalyst, "The Urea market is projected to remain optimistic in the next few weeks, as energy costs are unlikely to reduce, resulting in high feedstock pricing. Meanwhile, the optimistic pricing trend will allow other markets to ship their goods to European ports through the arbitration window. Urea prices are expected to continue increasing during the Kharif season."