Urea Prices Explained

Urea prices jumped over $400 per ton after a shortage of essential feedstock in North America (particularly ammonia) raised expenses for fertilizer producers. This stemmed from the disruption of an ammonia gas pipeline at the Bethpage ice rink, triggered by a malfunctioning compressor which caused the feedstock shortage.

Why are urea prices fluctuating?

1. Production Issues

The disruption of the ammonia pipeline in North America impacted urea prices as the region’s production capacity closed for a week. This event coincides with when favorable weather conditions in both North and South America boosted demand for fertilizers, ultimately leading to its price variation.

2. Demand and Alternatives

The high energy costs in Europe and the rising tension in the Red Sea made farmers switch to planting crops that aren’t fertilizer-reliant.

Additionally, the imposed sanctions on Russian (the second-largest urea producer) and Belarusian fertilizer products gave way for Canada (the fifth-largest producer) and Morocco to increase their potash and phosphate (urea alternatives) production. Thus, this accommodation saves the need for urea and contributes to its diminishing prices.

3. Issues for Top Urea Consumers

China and India are the top-priced movers of urea. China accounts for 30% of urea imports globally but the government asked its producers to suspend its exports as prices continue to rise domestically. Two Chinese state-owned producers announced that they would prioritize their domestic needs, ultimately hurting urea global supply.

Furthermore, the Indian government recently urged its farmers to reduce the use of chemical fertilizers by 20% in the upcoming winter-sown season as it will prioritize less dependent fertilizer crops due to the pressing concerns of soil and human health issues.

Which variables impact the price of urea?

• Production Issues
• Demand and Alternatives
• Issues for Top Urea Consumers
• Production Costs
• Weather Systems

Where does urea come from?

Urea and urea ammonium are both nitrogenous compounds used widely in agriculture as fertilizers. They contain the element nitrogen which is vital for plant growth but in different forms.

Urea is the most commonly used nitrogen fertilizer. It is easy to use and transport. Additionally, it contains 46% nitrogen, is very soluble, and moves in the soil in any direction water moves.

Ammonium nitrate contains less nitrogen (21%) compared to urea. However, it already contains nitrate, so plants can get nitrogen from it a bit faster than urea.

The urea portion of UAN will undergo the same reactions as urea-based fertilizers, but since urea is only half of the total material, the potential for volatilization loss is less. Urea is produced synthetically from ammonia and carbon dioxide. This is known as the Bosch-Meiser process. Here is a more detailed description:

Ammonia and carbon dioxide are compressed and fed into a reactor. The reactor is typically operated at a pressure of 100-200 atmospheres and a temperature of 180-200 degrees Celsius.

The ammonia and carbon dioxide react to form ammonium carbamate. This reaction is exothermic, meaning that it releases heat.

The ammonium carbamate is heated further to decompose it into urea and water. This reaction is endothermic, meaning that it absorbs heat.

The urea is crystallized and separated from the water. The urea crystals are then dried and packaged.

The Bosch-Meiser process is a very efficient way to produce urea as it produces urea with a purity of over 99%.

What are the uses of urea?

Urea’s top industry applications include the following:

1. Fertilizer – Urea is the most widely used nitrogen fertilizer in the world. Additionally, it is easy to apply, and relatively inexpensive compared to other nitrogen fertilizers. Wheat, vegetables, and fruit-bearing trees rely mostly on urea.

The total yearly urea agricultural use averages 60 million tons. India, the USA, Indonesia, Canada, and Bangladesh are its top consumers.

2. Feed Additive – Urea serves as a supplement diet for livestock such as cattle, goats, and sheep to increase their protein intake.

3. Chemical Feedstock – The production of plastics, resins, and adhesives isn’t complete without urea as a chemical feedstock.

4. Pharmaceuticals – Urea’s low moisture content helps even the body’s fluid build-up. Diuretics contain oral urea which helps the kidney remove salt and water through the urine.

5. Moisturizer – While it has a low moisture content, urea’s soothing properties make it a good ingredient in making moisturizers for people who have dry and itchy skin. Furthermore, urea-based lotions and creams are good for those who have flaky or scaly skin. However, the application of these products requires approval from certified dermatologists.

6. Textile – The textile industry uses urea to help dye fabrics and improve their texture. Additionally, it is used to soften fabrics, reduce wrinkles, and improve their fire resistance.

Overall, this white crystalline commodity comes from India, Russia, Indonesia, the USA, and Canada.

What is the future price of urea?

Urea’s elevated value presents a positive market outlook. Also, market analysts predict that its prices will remain relatively stable in the coming years as the Chinese government extended its fertilizer export bans to stabilize its domestic prices.

Here are the future factors that will contribute to urea prices in the coming years:

Nano-urea – While India is the biggest producer, it also tops as the major urea consumer. To leverage their production capacity, the country commissions some production plants to manufacture nano-urea, a liquid nitrogen fertilizer that they believe will perform better than urea.

This initiative seeks to end the country’s urea import by 2025.

Localizing demand – China’s conservative program to help its economic problem includes localizing its production. This means decreasing their imports and maximizing their assets.

Overall, these emerging factors will largely contribute to urea prices which will have a cost range from $350-$375 per ton in 2030.