Input Cost Pressure sends China Urea Prices on Bullish Run

The fertiliser market in China began to improve as the Chinese New Year comes to an end. Since the beginning of 2022, demand for urea, one of the most important fertilisers, has been strong. After New Year's Day, the demand for local stockings led Urea prices to surge. As the activities of Urea firms quickly resumed, the market began to rise. In addition, as the spring farming season began in March, the price began to fluctuate slightly. For the current week, the FOB price of Urea is USD 474 per tonne, according to the ChemAnalyst database.

Urea prices have risen as daily Urea output has decreased in February, with a decline in output in Shanxi, Hebei, Inner Mongolia, and Xinjiang being the primary cause of the progressive reduction in daily output. Furthermore, due to a paucity of natural gas resources around the world, coal and natural gas prices have continued to rise. Certain coal-based urea industries in North China have restricted production due to the Winter Olympics.  With a natural gas constraint, some urea manufacturing companies shut down near the end of the month. According to a report, as of February 28, the operational rate of Urea businesses across the country was 69%, down 2% from the previous week. The national daily Urea output was 153,200 tonnes, down 4,000 tonnes from the previous week and down 0.52% on a year-on-year basis.

As per ChemAnalyst “Domestic urea prices are projected to rise in March. The Russian-Ukrainian crisis has caused enormous uncertainty in international markets, potentially increasing the volatility of worldwide Urea prices. The peak production season for compound fertiliser firms is March-April. As a result, in March, there is still a considerable demand for Urea in fertilizer industries and agrochemicals. Although the cost-side rebound may stifle Urea's increasing trend, downstream stiff demand will help to keep the price stable to some extent."