World prices for urea have been stable above $300 per ton
The global nitrogen fertilizer market has reached a balance between supply and demand, thanks to which the quotes for their main type — urea — are consistently above $300 per ton and will remain at the current level in the near future. According to experts, either natural disasters, such as the hurricane in the United States, or a large-scale change in the policies of the largest consumers and producers — India and China — can significantly affect prices.
World prices for urea are growing in almost all regional markets amid limited supply after a large purchase by India. Following a tender announced on August 14 by the Indian NFL, the country purchased 1.2 million tons of this fertilizer, which is three times more than the volumes of previous trades. Following the tender, prices on the CFR India basis fell by $10-15 relative to the previous purchase, to $340-349 per ton.
The absence of excess volumes from suppliers against the backdrop of the start of the active purchasing season in Brazil, the US and Europe and export restrictions in China supports global quotes at a level above $300 per ton, according to the Price Index Center (PIC). Thus, despite the decreased netback, price indices in the Baltic direction, through which more than 80% of all fertilizer exports from the Russian Federation go, are growing. And a small correction in quotes at the beginning of September is associated with a slightly lower price than last year based on the results of the Indian tender, explains Nina Adamova from the Gazprombank PIC.
In the near future, the CCI believes that the main factor influencing the market will be the consequences of Hurricane Francine, which hit the US state of Louisiana. Now a new agricultural season is beginning in the US, when farmers are actively applying fertilizers. The suspension of domestic fertilizer production on the Gulf Coast, the closure of ports and disruptions in transportation may put pressure on the fertilizer supply chain, which may lead to an increase in prices for urea and DAP, which are needed to restore soils, the CCI believes. However, there have been no reports of damage so far.
In the phosphate fertilizer segment, says Evgeniya Popova, senior consultant at Implementa, the main factor of uncertainty that keeps prices high is the policy of restricting exports from China, their largest producer. If restrictions are eased, a decrease in world prices is likely, the expert believes. Potash fertilizer prices have almost returned to pre-COVID levels due to the redistribution of export flows, she notes. After the introduction of sanctions on potash supplies by the EU, Belarus significantly increased exports to China. A further decrease in prices is unlikely, the expert believes. In her opinion, in the future, nitrogen fertilizer prices, in particular urea, will stabilize at approximately the current level due to the balance in the market: despite the growth in demand in developing countries, many new urea capacities will be introduced.
In the long term, Evgeniya Popova believes, the main trend in the nitrogen fertilizer market will be the use of new "special" types that improve the efficiency of nutrient use. For example, in India, the government encourages farmers to use polymer- and sulfur-coated urea, as well as nanourea instead of regular urea, to reduce nitrogen losses. Another interesting trend is the desire of large consumers to reduce their dependence on imports. In India, new urea production facilities are being restored and put into operation, primarily based on coal gasification technology, despite the global desire to reduce the carbon footprint, the expert notes.
Experts do not expect a reduction in chemical exports from Russia. Fertilizers are one of the few goods whose export shipments are growing, says Ms. Popova. She recalls that foreign supplies of all types of fertilizers in the first half of the year grew by 20% compared to the same period a year earlier. Nina Adamova points out that exports are growing this year mainly due to the growth in the export of potash fertilizers, supplies of which were significantly reduced last year.
According to Ms. Adamova, the domestic market will also continue to grow, as there is great potential for increasing the use of fertilizers in domestic agriculture. But the reduction in profits of domestic grain producers over the past few years may make adjustments to the growth rate of domestic demand next year, she believes.
