German UAN Prices Weaken Amidst Dwindling Demand from Fertilizer Market

In the first half of May 2024, the global Urea Ammonium Nitrate (UAN) market displayed diverse trends. In the Asian market, prices remained stable due to demand that was slightly subdued. In contrast, prices in the German market experienced a decline, primarily driven by reduced costs of key raw materials, particularly ammonia. Fluctuating ammonia prices have significantly lowered production costs, exerting downward cost pressure on UAN market prices. Additionally, the overall price reduction was further influenced by decreased demand from major downstream fertilizer markets and a reduction in planting activities.

During the initial half of May 2024, the German market for UAN experienced a notable drop in prices, primarily due to declining prices of critical feedstock ammonia and a concurrent decrease in demand, largely influenced by adverse weather conditions. Additionally, concerns stated by Bulgarian farmers regarding EU guidelines, alongside the elevated costs of fertilizers and energy, highlight broader economic viability issues concerning agricultural operations. It is crucial to address these challenges to ensure the long-term sustainability of the agricultural sector.

Moreover, the oversupply of UAN in the European market persisted, despite the prevailing uncertainties in global trade dynamics. Multiple market sources suggest a slightly hastened decline in manufacturing business conditions across the euro area. This decline in UAN prices is accentuated by a more pronounced reduction in new orders, representing the most significant downturn witnessed this year. These developments emphasize on various challenges confronting the manufacturing sector and necessitate close attention from industry participants and policymakers. The interaction of these factors has narrowed the disparity between demand and supply, leading to a downward pressure on UAN prices.

In contrast, UAN prices remained stable in the Asian market. The influence of ammonia costs on these prices was mitigated by prevailing cost pressures. Notably, both domestic and international markets have experienced a shortage of new orders or bids, attributable to the Chinese government's suspension of exports until the peak planting season of 2024. Although NPK producers were anticipated to continue procuring high-nitrogen fertilizers for summer corn application, demand fell short of expectations, leading to a decrease in UAN demand.

Simultaneously, there has been a considerable remark of UAN inventories this week due to the government's suspension of export licenses for various fertilizers, including UAN. Insights from the market indicate a dearth of updates regarding China's UAN export restriction policy. Due to the strong domestic prices, there is a possibility that export inspection approvals could encounter delays until June-July 2024, and it is expected that the validity of export certificates will be shortened to 30 days from the previous 60 days. Consequently, no export sales have been reported, thus contributing to the surplus availability in the market.