Urea prices down $20pt on mid-December 2015 levels

• Negative start to 2016; nitrogen prices under pressure
• Plentiful global supply and low energy environment undermines potential for a sustained run-up in prices

It has been clear for some time that 2016 would be a difficult year for urea markets. Q1 has traditionally provided the best opportunities for producers to manage a run-up in global prices. However, low agricultural commodity and energy prices, the strong dollar and wider global economic uncertainty continue to hit urea demand. With product widely available, buyers have also been prepared to defer.

Prices have fallen by around $20pt for Black Sea prilled urea, Egyptian and Middle East granular urea with no immediate end to the current downward trend in sight. For Middle East producers, a major challenge has been the fall in Brazilian demand – down by 35% basis latest annual figures. This at a time when returns from the US Gulf market have been heavily hit. Indeed, urea barge prices fell below $200ps ton Nola last week, the lowest level since June 2006. In the East, Chinese producers are struggling in the absence of major prilled urea demand from the Indian sub-continent.

Profercy’s World Nitrogen Index utilizes key nitrogen fertilizer prices to derive a value for nitrogen as a crop nutrient and provides a straightforward tool to gauge the overall health of the World market for nitrogen fertilizers. As can be seen below, at just 112 points the Index has fallen to a low level not seen since July 2010. The latest downward movement has been exacerbated by a $100pt drop in Black Sea ammonia prices since November.

Average annual prices have been dropping since 2012 and there is nothing to suggest that 2016 will break this trend. As noted in our last post, further supply additions are expected in Asia and Africa this year with recent additions in the US due to reach full production capacity soon. These additions come at a time when low energy values will continue to play a key role in supporting production at previously high cost production plants.

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Profercy World Nitrogen Index: Methodology

The Profercy World Nitrogen Index is published every week and is based on price ranges provided by the Profercy Nitrogen Service. This includes prilled and granular urea, UAN, AN, ammonium sulphate and ammonia. A full methodology can be found here.