Urea Extends Decline as Supply Concerns Ease

Urea futures fell to around $420 per tonne, down more than 40% from the three-and-a-half-year high above $700 reached on April 15, as concerns over prolonged supply disruptions in the Middle East continued to ease. Prices came under pressure after signs of progress in negotiations aimed at restoring shipping through the Strait of Hormuz reduced fears of disruptions to fertilizer trade. The decline was also driven by China's decision to relax urea export restrictions, increasing global supply, while the market adjusted to cargoes previously delayed around the Strait of Hormuz. Seasonal demand has also weakened as planting across much of the Northern Hemisphere draws to a close. In addition, Brazil, one of the world's largest fertilizer importers, postponed purchases and imported less urea than a year earlier, further weighing on prices. Despite the sharp correction from April's peak, urea futures remain roughly 9% higher since the start of the year.

Urea futures rose above $700 per tonne, the highest since October 2022, and are more than 70% higher this year, as the war in the Middle East severely disrupts global fertilizer markets. The conflict has driven a sharp spike in natural gas prices, a key input for urea production, and restricted flows through the Strait of Hormuz, which handles about a third of global fertilizer shipments. Gulf Cooperation Council members, including Saudi Arabia, Qatar, and Oman, supply roughly a quarter of global urea exports, adding to concerns. Also, production in India and Bangladesh has been hit by plant shutdowns and maintenance amid limited LNG supplies. At the same time, China has tightened export restrictions to secure domestic supply, while Russia has curtailed shipments of key nutrients. Demand is also surging ahead of the spring planting season, particularly in large agricultural economies, forcing countries to scramble for imports and pushing prices higher.