Many Urea Prices at Lowest Point in Five Years
Prices slide further
About a week ago, urea prices hit their five-year lows. Last week, they continued the downward slide. Urea is one of the most widely used nitrogen fertilizers in the world. It requires ammonia as a feedstock.
Earlier in this series, we saw that ammonia prices for the week ended July 29, 2016, fell broadly week-over-week in North America and in international markets. Let’s see how urea prices moved over the same period.
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Last week continued to prove negative for urea prices. China, which is the largest producer and exporter of urea, saw a 2% decline in granular urea prices to $188 per metric ton week-over-week. That’s the lowest point in five years. The fertilizer industry is at the bottom of its cycle, and urea prices in China have fallen 33% from $280 per metric ton in the same week in 2015.
Prices of urea in the Corn Belt region also fell by 2% to $199 per metric ton free on board, compared to $204 per metric ton in the previous week. Similar to urea prices in China, current granular urea prices in this region hit a five-year low. They fell by 45% from $363 per metric ton YoY (year-over-year).
In contrast, granular urea prices in the Middle East rose by 2% to $185 per metric ton in the week ended July 29, 2016, from $181 per metric ton the previous week. Urea prices fell by 35% in the Middle East from $285 per metric ton in the same week in 2015. Prices in the Middle East bounced back from the five-year low last week to $181 per metric ton.
Prilled urea prices
Prilled urea prices remained unchanged in the Black Sea at $180 per metric ton, compared to the previous week. They fell by 36% YoY from $280 per metric ton in the same week in 2015. Prilled urea prices are at their lowest point in five years.
Urea prices have hit multiyear lows in 2016, which has presented a challenge for nitrogen fertilizer producers such as CF Industries (CF), CVR Partners (UAN), PotashCorp (POT), and Terra Nitrogen (TNH). Falling prices also impact ETFs such as the iShares Global Materials (MXI). MXI invests ~4.5% of its holdings in agricultural chemical companies such as Monsanto (MON) and Dow Chemicals (DOW).
In the next part of this series, we’ll look at natural gas, a key input cost for nitrogen fertilizers. According to PotashCorp, natural gas accounts for 70%–85% of ammonia production costs.