For the Quarter Ending December 2023
During the fourth quarter concluding in December 2023, the Urea Ammonium Nitrate (UAN) market in North America experienced a mix of sentiments. Initially, for the initial two months, UAN prices in the North American market were on an upward trajectory; however, as December approached, the UAN market took a downturn.
The surge in prices was primarily attributed to logistical challenges unfolding on the Mississippi River, with a crucial bottleneck north of Vicksburg, Mississippi, cutting off the Midwest from barge resupply until mid-March. This presented a challenging situation for farmers in the region, facing soaring prices in a fertilizer-starved market.
Adding to the complexities, China tightened export restrictions on UAN, withdrawing as a major supplier from the international market. This sudden disruption in the global supply chain led to a rush for remaining stocks, contributing to further price escalation. However, as December progressed, the UAN market shifted to bearish sentiments, supported by subdued demand from both domestic and international markets. Unfavourable weather conditions in the country posed a potential threat to crops, dampening consumer enthusiasm. Simultaneously, during this period, demand from major importing nation Brazil remained restricted, grappling with prolonged drought conditions exacerbated by the El-Nino effect.
During the fourth quarter concluding in December 2023, the Urea Ammonium Nitrate market in the Asia Pacific (APAC) region exhibited bullish sentiments, particularly impacting China and India. The rise in the cost of vital feedstock, Ammonium Nitrate, and heightened production rates in the region contributed to upward cost pressures on Urea Ammonium Nitrate (UAN). Initially, a robust demand from end-user fertilizer markets emerged as consumers stocked up for the winter crop, Rapeseed. Simultaneously, manufacturing units in Northern China operated at reduced rates, leading to material scarcity in the Chinese market. As the quarter progressed, global trade uncertainties and heightened freight charges were pivotal factors driving the surge in UAN prices. Major shipping companies, including Chinese Cosco and its subsidiary OOCL, alongside Taiwanese Evergreen, temporarily halted cargo transport on the Red Sea route, a vital maritime pathway connecting Europe, Asia, and Africa. Consequently, commodities were rerouted through alternative channels, elevating transportation costs. To safeguard profit margins, traders increased prices for various commodities, including UAN. In parallel, the Indian market experienced firm demand for fertilizers and Urea Ammonium Nitrate during the rabi crop season. Concurrently, a shortage of UAN supplies in the Indian market occurred after China ceased additional CIQ export licenses, adopting a stringent export stance. Reports indicated containers previously export-cleared were removed from vessels carrying fertilizers, including UAN.
The European UAN market in the fourth quarter of 2023 was characterized by a bullish trend for the first two months and declined lately. Yara's temporary halt in ammonia and its derivatives production contributed to the complexity of the supply dynamics, potentially causing a surge in spot demand and exacerbating the existing shortage in the European market. This shortage led to increased prices in the region. Further, demand for UAN remained firm from the international market during this period. After Chinese Government halted its fertilizer exports Asian consumers were active in the western market. However, as December approached demand from Asian market declined as the peak planting season has passed. Further, adverse weather conditions within the region along with heavy rainfall posed to be a potential threat for the crops. This has further dampened the buying enthusiasm of UAN consumers for Spring 2024. Additionally, trade uncertainties amidst rebel attacks in the Red Sea had caused the traders to opt for alternative trade route. In an effort to avoid strikes by Iran-backed Houthi militants based in Yemen, carriers have already diverted trade over the past several weeks away from the crucial Middle East trade route, which, along with the Suez Canal, connects the Mediterranean Sea to the Indian Ocean. This has created a multiple-front storm for global trade, leading to a surge in European port inventories. The interplay of these factors prompted towards narrowed gap between demand and supply.