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How Urea Prices Continued to Fall despite Capacity Shutdowns

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Urea prices

In the previous part of this series, we discussed how urea prices started to trend upward toward the end of 2016. However, as we moved into 2017, urea prices appear to have reversed.

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Price fall

At each of the four locations in the chart above, urea prices have fallen YTD (year-to-date) as of June 23, 2017. They’re now trading even lower than the levels they saw in the corresponding week in 2016. To put this in perspective, average urea prices at the above four locations have fallen 7% year-over-year (or YoY), and New Orleans urea prices have fallen 8% YoY.

You can track fertilizer prices on a weekly basis with Market Realist. Check out our recent series Ups and Downs: Fertilizers Were Mixed for the Week Ending June 23.

New Orleans is where urea imports come into the United States. A rise in imports pushes down prices, which is negative for players such as CF Industries (CF), Terra Nitrogen (TNH), CVR Partners (UAN), and PotashCorp (POT), all of which operate in the United States (MXI).

CF’s price

Not only have urea prices fallen, but the prices for CF Industries’ other nitrogen products are also trading lower YoY. The environment for nitrogen fertilizer prices remains a concern because despite capacity shutdowns, the global market is experiencing net capacity additions. We’ll discuss this issue in more detail next.

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