Urea Ammonium Prices Explained
Urea ammonium prices met pessimistic market sales at a decrease value of 2.78%. This is due to the decreasing ammonia feedstock prices and the extended oil production export cut implemented by OPEC+ (Organization of the Petroleum Exporting Countries).
Generally, urea ammonium is made of urea (a white and odorless solid produced from the breakdown of proteins in animals and plants) and ammonia ( a colorless and strong gas produced from the reaction of nitrogen and hydrogen). Additionally, a major part of manufacturing urea ammonium requires a lot of energy resources. Thus, these compounding factors influence urea ammonium prices and availability.
Why are urea ammonium prices fluctuating?
1. Input Cost Prices
The price of urea ammonium largely depends on its raw materials such as natural gas and ammonia.
Expectedly, the cost of these key feedstock, especially natural gas ( a major source of ammonia ), directly impacts its prices. However, this dynamic is not a two-way street as natural gas has various uses which can potentially increase and decrease its demand and market prices.
Additionally, the production cut announcement by OPEC+ and the increasing trade between China and Russia (through its less compromising market) caused some market imbalances. Thus, demand connectivity across the economic field plays an important role in urea ammonium price fluctuation.
2. Supply and Demand
Another significant price determiner of urea ammonium is the market balance between supply and demand. The fertilizer’s need stems from seasonal demand changes, agricultural methods, and global market dynamics. Furthermore, its availability depends on production capacity, import and export regulations, and international trade flow.
Generally, manufacturers and suppliers benefit the most during spring and summer as these are the planting and growing seasons for farmers. However, inflation largely affects fertilizer as purchases from international markets such as India and South Korea are particularly low.
Overall, this tug of war in urea ammonium prices creates its value fluctuation.
3. Energy Costs
The cost of natural gas and other energy resources utilized in the production of urea ammonium are significant elements affecting its prices. According to the U.S. Department of Energy, the amount of energy needed to manufacture urea ammonium varies depending on the plant and the process used.
However, a typical plant uses about 29.7 million BTUs ( British thermal units ) of energy per ton of nitrogen produced. This is equivalent to about 2.5 tons of carbon dioxide emissions. Thus, this and other underlying costs such as machine maintenance, storage fees, and labor costs coupled with the increasing fuel prices greatly affect its shifting prices.
4. Asian Buyers
The extended Chinese export ban on urea and other fertilizer products, coupled with quotas and lengthy inspections made China an increasingly unreliable supplier. As a result, most Asian buyers turned to finding new market alternatives.
For instance, India (the world’s top fertilizer buyer) increasingly imports more fertilizer products from the United Arab Emirates. Also, Malaysia and South Korea shifted their phosphate purchases to Vietnam and Egypt. These market changes compensate for the slow supply in Asia which can stabilize urea ammonium prices.
Which variables impact the price of urea ammonium?
- Input Cost
- Demand and Supply
- Energy Costs
- Asian Buyers
- Global Market Dynamics
- Currency Exchange Rates
- Government Policies
Where does urea ammonium come from?
The discovery of urea is something you won’t particularly like but its evolution works wonders. Dutch botanist and chemist Herman Boerhaave first noticed urea from urine evaporation in 1727. More than 50 years later, French chemist Hilaire-Marin Rouelle first isolated urea from urine in 1773.
In 1812, German chemist Friedrich Wöhler first discovered urea ammonium when he tried to synthesize ammonium cyanate but accidentally produced urea instead.
Wöhler then made the first batch of urea ammonium by treating silver cyanate with ammonium chloride. This formulation led to various modifications however, the modern process of urea ammonium production is a two-step process:
1. Reaction of ammonia and carbon dioxide to form ammonium carbamate. Ammonia and carbon dioxide are mixed in a reactor at a temperature of about 200°C (392°F) and a pressure of about 150 atmospheres. This reaction forms ammonium carbamate, which is a white solid.
2. Dehydration of ammonium carbamate to form urea. The ammonium carbamate is dehydrated to form urea by heating it to a temperature of about 230°C (446°F) and a pressure of about 10 atmospheres. The urea vapor is then condensed to form a liquid urea solution.
Finally, the urea solution is concentrated by evaporation or crystallization. The crystals can be melted to produce pure urea as prills or granules. The modern process of manufacturing urea is highly efficient. The yield of urea is typically about 95%. Furthermore, it’s relatively environmentally friendly.
What are the uses of urea ammonium?
90% of urea ammonium production is directly credited to agricultural purposes however, it has other various applications too. This includes the following:
1. Fertilizer – Urea ammonium is a very effective and inexpensive fertilizer, making it a popular choice for farmers. Plants quickly absorb their nitrogen which is essential for their growth.
2. Foaming Agent – Due to its stable foam characteristics and easy application, urea ammonium is a good foaming agent used in a variety of products such as fire extinguishers, shaving cream, and shampoo.
3. Plasticizer – Urea ammonium has a plasticizer substance which makes polymers softer and more flexible. Thus, it is an active ingredient in making polyurethane and nylon. What’s more?
Using urea ammonium as a plasticizer is relatively inexpensive, non-toxic, and environmentally friendly.
4. Pharmaceuticals and Cosmetics – Urea ammonium in pharmaceuticals and cosmetics has some specific uses:
Humectant. Its humectant property, which means that it attracts water molecules, makes it useful in products that must be moist such as lotions, creams, and ointments.
Preservative. Urea ammonium has antimicrobial properties which can prevent the growth of bacteria and mold in products. This makes it useful in cosmetics and pharmaceuticals that are sensitive to microbial contamination.
Exfoliant. Urea ammonium’s humectant and keratolytic properties soften and break dead skin cells, making it an effective exfoliator. Additionally, it’s non-irritating to most people. Thus, it’s safe and gentle for all skin types.
Now, this versatile compound with a wide range of uses comes from the top urea ammonium producer countries such as China, India, Russia, Canada, and the United States.
What is the future price of urea ammonium?
Urea ammonium’s price is currently low compared to the previous year’s market however, these are the factors that will affect the price of urea ammonium in 2030:
Global demand for food. Worldometers’ prediction showed that the global population will increase by 0.82% in 2030. This means that another need will put a strain on world food production. Urea ammonium is a key fertilizer used to increase crop yields, thus, the demand for it is likely to grow in the coming years.
Fluctuations in energy prices. Since the production of urea ammonium requires a lot of energy, then, its price will always be sensitive to changes in energy prices. Additionally, the current tension between the West and the Houthi militia in the Red Sea will affect its production stability.
Chinese policies. The soaring prices of urea in China (the world’s largest urea producer) prompted the country to extend its export ban on urea and other chemical fertilizer products to contain its domestic prices, highly influencing the global urea ammonium prices.
Overall, based on these future and current factors, most experts believe that the price will remain relatively stable or increase slightly. According to a recent report by Profercy, the average price of urea ammonium in 2030 is expected to be around $300 per metric ton, slightly higher than the current price of around $280 per metric ton.