Urea in 'tight supply' on cuts in China exports, gas from Egypt: Fertiglobe

The urea market is facing a "tight supply" as China's exports in the first half dropped to a record low and natural gas feedstock supplies have been curtailed in Egypt, UAE-headquartered fertilizer exporter Fertiglobe said Aug. 1.

After falling 87% on the year in the first half of this year, Chinese urea exports are expected to remain below 2 million mt this year compared with 4.3 million mt in 2023, Fertiglobe said in an Abu Dhabi stock exchange filing. China is keeping more urea for its own farmers and industrial users with inventories remaining low, it said.

Meanwhile, Egypt has halted LNG exports during the summer months and has turned to LNG imports instead to meet high seasonal demand amid declining domestic production.

Farmers planting

As a result, urea prices have recovered in recent weeks after falling in the second quarter year-over-year due to reduced import demand from India in April. The market has improved on demand from farmers planting at the tail end of Northern Hemisphere Spring grain applications, the company said.

Even though natural gas costs rose in Q2 from Q1 and grain prices were steady, prices of nitrogen used to make urea fell due to "delayed demand, cautious buying behavior and reduced Indian urea imports," Fertiglobe said.

"Encouragingly, markets have started to tighten, resulting in recent ammonia and urea price increases, while medium to long-term fundamentals also remain supportive," the company said.

Despite the new merchant supplies ahead, ammonia markets are expected to be "firm in the short-term and broadly balanced through year-end," Fertiglobe said. It noted limited ammonia supplies at some export hubs west of the Suez Canal, which are expected to support gains in CFR NW Europe prices from about $520/mt currently, it forecast. Platts-assessed Tampa, Fla., ammonia price increased $60/mt for August deliveries.

"These dynamics are expected to support a period of relative price stability and a broader global trade recovery in ammonia following two years of prolonged contraction," the company said.