Global Urea Prices Decline Due to Weak Demand and Weather Disruptions; Recovery Expected

The global Urea market experienced a decline during the first week of September 2024, primarily due to weaker-than-expected demand. Adverse weather conditions, including tropical rains and storms, disrupted agricultural activities, reducing the need for Urea fertilizers. Although production activities were also affected by these weather challenges and subsequent power outages, their impact on Urea prices remained limited. The subdued demand outweighed the production disruptions, resulting in an overall downward trend in the Urea market during this period.

Urea prices in the North American region have continued to decline, despite rising Ammonia costs exerting minimal pressure on the market. This downward trend is largely driven by a narrowing supply-demand gap, with both domestic and international demand remaining subdued. In major export markets like India, adverse weather conditions, including excessive rainfall, have weakened demand, prompting a cautious approach to new purchases. Domestically, demand has also been affected by weather uncertainties. After an initial surge in purchases for the forthcoming winter planting season, the arrival of Tropical Storm Francine has led buyers to hold back. This bearish trend is expected to persist until more favourable conditions revive purchasing activity.

Despite the ongoing challenges, the United States has maintained a sufficient supply of Urea, ensuring stable inventory levels. However, potential disruptions loom due to labour issues. The ILA, which represents workers at 36 major U.S. ports, has raised the possibility of a strike, with a new labour contract deadline set for September 30. This situation poses a risk to the smooth flow of Urea supplies, highlighting the critical need for a resolution to avoid disruptions in the logistics and distribution of essential commodities.

In like manner, the prices declined in the Asian market with China being the most affected region. Despite modest inquiries from international markets, especially European countries, domestic demand continued to face challenges. Unfavourable weather conditions in the region, exacerbated by the impact of Typhoon Yagi, prompted consumers to adopt a wait-and-see approach, fearing potential damage to crops, which further restrained demand. Simultaneously, the Chinese market contended with an oversupply of domestically produced Urea, with stockpiled inventories accumulating due to persistent port congestion and delays in exports. Elevated congestion at major Chinese ports, including Shanghai, Ningbo, Yantian, and Qingdao, has been particularly problematic, with vessel berthing delays extending up to two days due to high traffic and the clustering of vessel arrivals. These logistical challenges have led to significant stockpiling of Urea inventories at Chinese ports, as the delays in international shipping and the accumulation of excess stock have contributed to an oversupply situation within the domestic market. This surplus, coupled with subdued purchasing activities, contributed to maintaining a close balance between supply and demand, ultimately resulting in a stable pricing environment for Urea during the review period.

As anticipated by ChemAnalyst, the price of Urea is expected to increase in the forthcoming months. The upcoming winter planting season may lead to a revival of demand for Urea owing to a price surge.