While ammonia prices were broadly down, urea prices moved sideways last week. Urea is the most used nitrogen fertilizer subtype around the world, and most global ammonia production has been upgraded to urea.
Granular urea prices
Granular urea prices in the Middle East remained unchanged at $208 per metric ton in the week ending June 17. Earlier in January, urea prices in the Middle East hit a low of $195 per metric ton. Urea prices have fallen 33% in the Middle East from $310 per metric ton in the corresponding week in 2015.
Granular urea prices in the Corn Belt also remained unchanged compared to the previous week at $222 per metric ton FOB (free on board). Current granular urea prices in this region have hit a four-year low and YoY (year-over-year), they are down 38% from $358 per metric ton.
Granular urea prices in China also remained unchanged in the previous week at $208 per metric ton week-over-week. Granular urea prices in China reached a low point of $200 per metric ton in March 2016 and have fallen 33% from $310 per metric ton in the same week last year.
Prilled urea prices
Prilled urea prices also remained unchanged at $195 per metric ton week-over-week in the Black Sea. Prilled urea prices fell to the low of $183 per metric ton in January this year and are down 34% year-over-year from $295 per metric ton in the corresponding week a year ago.
Urea prices have hit multiyear lows in 2016, which is presenting a challenge for nitrogen fertilizer producers such as CF Industries (CF), CVR Partners (UAN), and Agrium (AGU). Falling prices also affect the Materials Select Sector Fund (XLB). XLB invests ~13% of its holdings in chemical companies and 11% in 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.