Prices For Urea Remain Stagnant as the Outlook for Global Demand is Bleak

Prices for Urea remain severely depressed as a result of an abundance of supplies and a lack of demand. According to some reports, sales of Urea in the Middle East reached as low as USD 410 PMT FOB, leaving almost 800,000 MT of the product unsold for February 2023. According to reports, Chinese producers have over 400,000 MT of prilled Urea in storage at ports while they wait for an India Urea tender. However, India does not appear to be returning to the market with a spot tender soon. Most market participants returned this week after the holiday break to find a combination of inactivity, lower European gas prices, and no Indian Urea purchasing tender in sight.

One of the significant defining characteristics of Nitrogen fertilizer sentiment has been European gas prices because they set a production cost barrier beyond which European production is no longer feasible. In fact, on December 19, Achema Lithuania temporarily halted all remaining production. However, over the past few weeks, values have dramatically decreased because of the mild winter conditions in Europe.

The next planned Indian tender is still being postponed; therefore, Urea demand is still largely absent and subpar in some areas. Fundamentally, the only market that has been active for the past two to three months has not returned to the market as predicted. The demand from the US, Europe, and Brazil is still minimal. Brazilian purchasers have been making speculative purchases while attempting to lower the price. The abovementioned gas prices and earlier imports have, at least temporarily, hampered demand in Europe. Meanwhile, the US remains well behind on season imports, but demand remains weak with the application season still months away.

Additionally, the upcoming week may see an Asian halt due to the Chinese New Year festivities and TET in Vietnam. It has been reported that some Urea cargoes coming from the US, Nigeria, and Malaysia to Europe are only partially sold since buyers are waiting for prices to drop in the coming weeks. Through December 2022, China exported 2.8 million MT of Urea, a 46.8% decrease from the previous year.

As per ChemAnalyst, In the upcoming months, Urea imports will be necessary for the US. However, given the plentiful Urea supply, US consumers might not have trouble finding it unless a significant rival market (like Europe) starts to compete for the same goods. Overall, the worldwide Urea market has a gloomy perspective, which is expected to last for a while.