Previously, we saw the weekly change in prices for ammonia. According to FERTECON, about 54% of the global ammonia production was upgraded to urea in 2013. China is the largest exporter of urea.
For the week ending March 4, 2016, urea prices in China fell the most. The prices fell by 2% to $215 per metric ton from $220 per ton a week ago. The urea prices in China fell by as much as 31% YoY (year-over-year) from $310 per ton during the same week a year ago. China uses coal as a hydrogen source to produce nitrogen fertilizers as opposed to natural gas. We’ll discuss natural gas prices in more detail later in this series.
The price of urea in the US Cornbelt and the Middle East remained unchanged compared to a week ago at $220 per metric ton and $305 per short ton—or approximately $276 per metric ton. On the other hand, urea prices in the Black Sea rose slightly by 1% to $212 per metric ton. The urea prices in the US Cornbelt fell by 20% YoY. In the Middle East, the prices fell by 27%. The urea prices in the Black Sea fell by 29%.
Looking at the above chart, the urea prices seem to have rebounded from their respective lows in the second half of January 2016. This is positive for agricultural fertilizer companies such as CF Industries (CF), CVR Partners (UAN), PotashCorp (POT), and Agrium (AGU). It also benefits the iShares U.S Basic Materials (IYM). IYM invests about 12% in agricultural chemical companies.
In the next part of this series, we’ll discuss the input costs for nitrogen fertilizers.