What is happening in the granular urea market?

Down below you can see the price changes in natural gas, urea (granular), DAP, corn, wheat and barley:

         Figure: Price changes in commodities from January 1st 2024 until February 12th 2024. Soruce: Refinitiv Datastream

Supply side:

Urea granular currently has a 14,3% increase since the beginning of 2024, whilst DAP has a 3,1% increase. Natural gas, an important component to especially urea (granular) production, is currently down 30,3% (NYMEX Henry Hub) this year. A low gas price should stimulate to a lower granular urea price, but this has not been the case for the American market in 2024.

 

Demand side:

The spot price for corn and wheat are also down in 2024, -7,7% and -3,9% respectively. Decreasing prices for urea intensive harvests such as corn and wheat should affect the granular urea price negatively, since the marginal profit of increased urea consumption is lower.

 

Possible explanations:

ADM Agri published their weekly market report on February 15th, and they point out that the March shipment demand for North African granular urea to Europe is minimal, which pressures the price downward. But it is also reported that the US interest for North African granular urea is increasing, which is a supporting factor to the North African granular urea price. Source: https://www.adm-agri.co.uk/15th-february-2024/

 

The information from ADM Agri supports the contradiction we are seeing in the market, with increasing granular urea prices while natural gas prices are decreasing. With the information available, it looks like the American market are holding the granular urea price up.

 

What to look out for the next weeks:

-      A volatile gas price: In the end of November 2023, it was reported that the European gas storages were full. The Dutch TTF Natural Gas Price is trending downwards, which indicates that the storage levels in Europe still are at a high. On the other side, Morningstar pointed out in November that the gas price is experiencing an increased geopolitical risk, and that we can see a more volatile gas market throughout 2024. Source:  https://www.morningstar.no/no/news/243055/europas-gasslagre-er-stappfulle.aspx


    Figure: Daily gas prices (Dutch TTF and Henry Hub) from January 1st 2023 until February 12th 2024. Source: Refinitiv Datastream
 

-      DAP demand is increasing: From ADM Agri weekly report

-      When does China re-initiate gas export, and at which level? In Yaras quarterly presentation last week, Market Director Dag Tore Mo said that the consensus in the market is that China will reinitiate export of gas in the second quarter of 2024. The volumes of export will be one of the big uncertainties on the supply side for the fertilizer market this year.

 

 

 

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