Tight nitrogen supply boosts prices
SASKATOON — Strong nitrogen fertilizer demand is butting up against tight supplies in some regions of the world, says an analyst.
India is the world’s top importer of the product.
Indian urea demand surged to 38.8 million tonnes in 2024-25, an eight per cent increase over the previous year, according to Argus Media.
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That was due in part to tight supplies of diammonium phosphate (DAP) fertilizer during the winter (rabi) crop season.
India’s urea production fell to 30.6 million tonnes in 2024-25 from 31.4 million tonnes the previous year, further tightening the country’s supply/demand balance.
Stocks were estimated at seven million tonnes as of mid-April, which is about 3.6 million tonnes below the same time a year ago.
India’s urea prices have been trending higher since January 2024.
“A jumping U.S. market, driven higher by the tariff rollout in early April, has pulled international prices higher,” Harry Minihan, nitrogen editor at Argus, said during a recent webinar.
The barge price in New Orleans has soared to more than US$500 per ton from less than $400 at the end of March.
Demand in another key nitrogen fertilizer market has been soft. Brazil imported 1.29 million tonnes of urea in the first quarter of 2025, the lowest volume for that period since 2016.
Brazil’s urea is trading at a $50 per ton discount to the United States.
“Brazilian buyers have not jumped as U.S. prices have rocketed up and the discount is widening,” he said.
The slowdown of Brazil’s urea imports is due to farmers pivoting to ammonium sulphate fertilizer. First quarter imports of that nitrogen fertilizer product are up 56 per cent to 1.27 million tonnes.
It has also been driven by a shutdown in Iranian urea production, which lasted from the start of December to mid-March.
Minihan said Brazil’s shipments of urea will have to “accelerate significantly” in the coming months to make up for the slow start.
The situation in Australia is the opposite, with buyers frontloading urea deliveries.
Imports for the October 2024 through February 2025 period were 800,000 tonnes, a 29 per cent increase from a year earlier.
They are expected to remain strong well into June before slowing down after the winter crop is harvested.
Farmers in the Australian states of Victoria, New South Wales and South Australia have been reluctant to purchase urea from retailers due to dry conditions, although prospects appear to be improving in those states.
Owen Gooch, senior analyst with Argus Consulting Services, said nitrogen fertilizer manufacturers in the European Union are still struggling with the high cost of production.
Those costs peaked during the energy crisis of 2021-23. Natural gas prices have since dropped but are still volatile.
“Production economics remain on a knife’s edge,” he said.
The European Council has a proposal that will significantly water down natural gas storage mandates, which should ease the pressure on gas markets.
However, the EU’s Carbon Border Adjustment Mechanism, which is essentially a carbon tax on energy products entering the EU market, could accentuate price pressures in that market.
It takes effect Jan. 1, 2026.
“From this point onward, a financial levy will be applied,” said Gooch.
He expects it to affect 13 million tonnes of EU fertilizer imports, including 6.5 million tonnes of urea.
“The impact must not be understated,” he said.
Argus expects 11.2 million tonnes of new urea capacity to come online in the 2025-30 period.
That is not a lot, considering 6.2 million tonnes were added in 2022 alone.
“Capacity additions have really, really tailed off,” said Gooch.
Fertilizer manufacturers are shifting their investment focus to lower carbon forms of nitrogen, such as green ammonia.
However, there will still be investment in urea capacity in places such as Russia, Nigeria, India and Indonesia.
Source: producer.com