Urea prices tumble on global market
By MATEUSZ PERKOWSKI
Wholesale prices for urea on the global market are bottoming out but are unlikely to rebound to any significant degree, experts say.
After hitting $700 per short ton in the spring of 2012, urea prices along the Gulf of Mexico -- a major trading area -- are now trading at about $310 to $320 per short ton, experts say.
Incoming shipments of urea from China could bring the price down to $300 per ton, but the resulting increase in demand would likely bring the price quickly back up, said Glen Buckley, chief economist at the NPK Fertilizer Advisory Service.
However, large global supplies of urea will prevent a strong resurgence in price, since major buyers can stay out of the market until prices recede, he said.
"You've got a bottom, but you don't have an upside either," Buckley said. "It's sort of a bounce around market."
Over the long term, prices for other nitrogen fertilizers -- like anhydrous ammonia and urea ammonium nitrate, or UAN -- tend to follow the trends for urea, so farmers can expect those retail costs to continue dropping, he said.
"There's no issue of supply," Buckley said. "From their perspective, buy it when you need it."
Clive Yearsley, chairman of the Profercy fertilizer market analysis firm, said he expects the nitrogen market to remain "range bound" -- with prices trading in a fairly narrow range -- for the foreseeable future.
"It's a flat kind of market. There's no trend," he said. "I definitely don't see a bullish trend in the market. This could go on for a long time."
Major buyers feel no urgency to stock up on supplies, preventing a run-up in prices, but the cost of nitrogen is also unlikely to plummet more steeply due to production curtailments in former Soviet states, Yearsley said.
Urea prices are likely to swing in the $20 to $30 band per short ton, he said. "It's a fairly boring market actually."
Such stability would be a departure from recent years -- nitrogen prices surged in 2008, sunk dramatically during the depths of the recession in 2009, and again rebounded through the spring of 2012.
Prices have since been driven down by increased global production as well as some weather-related demand disruptions, said Buckley. "There's a huge volume of product coming on to the market that's got to find a home."
One of the major factors that have brought down U.S. urea prices has been stepped-up exports from China, he said.
The Chinese government doesn't intend to be a big urea exporter, but it does want to produce enough for the country to be self-sufficient, Buckley said.
However, the Chinese government does significantly lower tariffs for urea when there's a surplus of the product available for export, he said.
This summer, China has a lot of urea to export due to overproduction and an economic slowdown, Yearsley said. Meanwhile, the price of coal -- which the Chinese use to manufacture urea -- has decreased, lowering their break-even price.
"It's a better exporting environment for the Chinese this year," he said.