Urea Continues to Move Lower -- Outlook Suggests More of the Same

April 23, 2013 04:45 AM

Urea has been on a bearish run that has continued since the Monitor started collecting data in June 2012. This week's anhydrous price by pound of N is $0.53 and with a nitrogen content of nearly 85%, NH3 has been the nitrogen of choice for years.

The price of urea by the pound of N has been steadily shrinking. Currently, your Inputs Monitor has urea at $568.85/ton or $0.62 per pound of N.4 23 N

Current urea prices at NOLA, the Black Sea and the Corn Belt are all well below year-ago as a result of an oversupplied market in 2011-12. Exports from China flooded the market, and forced prices to their current low. Imports of urea during the period July 2012-February 2013 increased by 44% over the prior year at 4.2 million tonnes. YARA expects China to continue to produce and export at their current clip into the summer of 2013 and the result will be more price declines.

Chinese urea production capacity has been on the rise through 2012 and roughly 20 million tonnes of new production capacity has been added in the last year while world demand has faded, increasing only 2% on an expected 3% for the last three years running.

Meanwhile, Ukraine has added natural gas pipeline capacity to its urea manufacturing sector, and several U.S. urea projects are underway -- both are positioned to profit from wide production margins on cheap natural gas.

If the global oversupply of Chinese urea fades, product from the Black Sea and the United States should arrive just in time to mitigate a potential price spike. Looking ahead, as urea inches closer to the price of anhydrous, growers may decide that in light of the hazards and added expense of NH3 applications, urea is positioned to present a viable and attractive alternative.

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