What is forcing the global Urea market to uptrend
- 01-Apr-2022 4:44 PM
- Journalist: Jung Hoon
Urea prices have remained at historic highs due to a peak in demand and persistent supply shortages. International prices of necessary fertilizers, including Urea, had been rising for months; however, Russia's invasion of Ukraine exacerbated the problem. The price rise was due to supply restrictions and a gradual increase in energy prices. Natural gas, for example, is a significant raw element in Urea production. The price of Urea in the last week of March was 10% higher than the previous month, i.e., at $976 per tonne in FOB Gulf, USA. While the price in FOB Qingdao, China, has recently risen to USD430/MT, raising the cost of grain sowing for farmers.
The Chinese authorities aim to curb the inflationary trend in markets to secure orders and maintain price stability among Chinese Urea producers after noting the rising Zhengzhou Commodity Exchange (ZCE) rise in Henan, China. The fertilizer price has risen dramatically because of rising coal prices combined with maintenance turnarounds at some Urea plants. Furthermore, because India relies heavily on Chinese imports for Urea, a key manufacturer, China's domestic market stockpiles have decreased to meet export levels.
With the exacerbating Ukraine crisis and Russia's blockade of supply lines, the cost of fertilizer imports is likely to rise much more. However, in the Indian market, domestic Urea production has increased by allowing current production units to produce more simultaneously. Since the escalation of stress between Russia and Ukraine in late February, India has been experiencing significant supply shortages. Russia, which produces roughly 13% of global fertilizer, is a primary provider of various fertilizers to countries, including India. It temporarily restricted fertilizer exports earlier this month, raising fertilizer costs that were already high.
As per ChemAnalyst, "India has been struck hard by the fertilizer shortage. Urea and other fertilizers' prices have risen worldwide because of the limited coal and natural gas supply in Europe, which has pushed several fertilizer companies to close. China and Russia have also restricted exports to protect domestic supply. This year's fertilizer prices are projected to stay high in the global market."