Global Urea Market Declines in April 2024 Amidst Narrow Demand-Supply Gap

The global Urea market has sustained a bearish trend throughout the latter half of April 2024. This decline is primarily attributable to the reduced costs of crucial raw material Ammonia. The decline in Ammonia prices has significantly affected production costs, thereby exerting downward pressure on market prices. Additionally, a decrease in demand from prominent downstream fertilizer markets coupled with diminished planting activities, has further augmented the overarching decline in prices.

During the first half of April 2024, the North American Urea market experienced a significant downturn. The recommencement of operations by BASF, a prominent Urea producer in the region, subsequent to a maintenance shutdown, has notably enhanced the supply of Urea within the North American market. Furthermore, the market has experienced reduced netbacks on contractual shipments to North African and Asian markets in recent weeks. This reduction in netbacks has exacerbated the downward pressure on Urea prices in the region.

Additionally, on March 28th, the US Department of Agriculture unveiled a significant investment of USD 124 million in renewable energy and fertilizer production endeavours spanning 44 states. This strategic initiative aims to mitigate input costs for agricultural producers. It is expected to generate approximately 3,800 tonnes of dry fertilizer per year, distributed across three facilities situated in Iowa and Nebraska. With a combined production capacity of 11,400 tonnes, these initiatives are forecasted to benefit approximately 1,500 producers. This investment not only advocates for sustainable agricultural practices but also fortifies economic resilience within the fertilizer sector. Consequently, it may influence the price of Ammonia, reflecting the evolving dynamics within the industry.

Similarly, the Chinese Urea market witnessed a downward trajectory during the latter half of April 2024. The impact of vital feedstock, ammonia, on Urea prices has been somewhat moderated by cost pressures. Significantly, there has been a notable absence of fresh orders or bids from both domestic and international markets, attributed to the Chinese government's ongoing suspension of exports until the peak planting season of 2024. Furthermore, reports indicate that Urea production is presently operating at a capacity of 188,000 tons per day, reflecting an increase of 7,000 tons per day compared to the preceding week. Concurrently, nitrogen fertilizer reserves continue to be gradually released into the market, further augmenting the available supply.

Simultaneously, the demand for Urea remained restricted within the Chinese market. Inland demand remains strong. NPK producers were expected to continue purchasing to make high nitrogen fertilizers for summer corn application and corn also needs Urea, however the demand fell short of expectations.  Furthermore, data released by the National Bureau of Statistics (China) indicates a decline in new export orders from 51.3 to 50.6, corroborating the prevailing market dynamics.