Urea Prices Surge in USA and Europe, While Asian Market Faces Downward Trend

During the last two weeks, Urea prices have increased slightly in the USA and European markets amidst tight supply, reduced production activities, and increased cost of essential feedstock Ammonia and Natural Gas. However, in the Asian region, major Urea exporter China has continued to impose export restrictions, leading to stockpiled inventories.

In the European region, the Urea market in Germany experienced a significant price surge. This increase was driven by the rising prices of essential feedstock Ammonia and upstream Natural Gas within the and limited material availability. The European gas hubs saw a bullish turn, leading to restricted Urea production in the region, as producers were hesitant to increase production in line with the feedstock cost escalation. Further, BASF, a major chemical producer in the European region, announced a reduction in production rates. The company is closing several energy-intensive factories, including two feedstock ammonia plants and related fertilizer facilities, resulting in a shortage of material in the German market. This shortage of feedstock has exerted upward pressure on Urea prices. This shortage has further compelled German manufacturers to import Ammonia from the USA market. Compared to the USD, the weakened Euro contributed to the higher costs of Ammonia imports in the German market.

Similarly, in the United States, the Urea market in USA experienced a slight incline during the first half of October 2023. This price escalation can be attributed to a combination of factors, including increased essential feedstock Ammonia price, high production rate, and tight material supply within the domestic market. The elevated cost of essentials exerted upward pressure on Urea's price. Further, limited trading volume has driven up Urea prices in the United States. However, as per data provided by various market sources, a scarcity of inquiries from the international market was observed during this period.

Conversely, in the Asian market, the Chinese Urea market saw a price decrease. This price decline can be attributed to a few key factors, including the lowering cost of essential feedstock Ammonia and upstream Coal during this week and reduced production rates within the country, which placed downward pressure on Ammonia prices. Demand for Urea from the Asian market was notably low this week, especially in India, as most orders had been placed on a contractual basis for the last week of September. Furthermore, demand from the domestic fertilizer market exhibited a moderate pace during this period. Further, China's export restrictions and a shortened purchase window period for major importers in India and Brazil contributed to the price movement. Consequently, the FOB price of Urea was assessed at USD 397/MT at Qingdao port on October 13.

According to a report from ChemAnalyst, Urea prices are projected to increase globally in the coming months. This price upswing can be linked to the escalating costs of the feedstock Ammonia and the upstream Natural Gas. Additionally, there is an expected surge in demand from the downstream fertilizer industry in the upcoming months, likely to be a driving factor for the anticipated price hike.