What is main rule in urea price in market ?
Urea price uptrend
In China and India, urea production is coal-based. After China and India, other major urea producing countries have good natural gas reserves. More than 80% of the urea produced is used in the preparation of chemical fertilizers containing nitrogen. A small percentage of urea is also used to produce chemical compounds such as plastics, adhesives such as urea formaldehyde and urea melamine formaldehyde, potassium cyanate (an edible industrial product) and urea nitrate (a type of explosive).
Urea production capacity in the world
Global urea production in 2019 was 170 million tons. China is the world’s largest producer and consumer of urea. The country’s production in 2019 was 53.6 million tons, accounting for 32 percent of global production. The next ranks are India and the United States based on production and consumption. High demand in India and the United States has also made the two countries the largest importers of urea. More than 70% of the world’s urea is produced in Asia , Urea production capacity has dropped to 209 million tonnes in 2019 after two consecutive years. According to the expectation of the launch of several projects, urea production capacity is expected to grow by 8% to 225 million tonnes in 2021 with 8% growth of 16 million tonnes, By 2024, the growth rate of production capacity is expected to decline to 230 million tons. The new capacities to be added by 2024 are mainly in India and Bangladesh (South Asia), Nigeria and Egypt (Africa) and EECA member states (Russia and Uzbekistan). Half of these projects will be carried out by 2021.
Supply and demand prospects
Global urea demand reached 181.4 million tonnes in 2019. China has a 29 percent share of demand, and Southwest Asia is second with a 24 percent share. Global urea demand for all expenditures is expected to increase by 0.9% in 2024 to 183 million tonnes, Urea demand will grow in most areas. South Asia is expected to account for the largest increase in potential global urea demand. Urea demand in Latin America and East Asia, including China, is also expected to increase significantly for its industrial sectors. The imbalance between potential supply and Urea’s anticipated global demand is expected to decrease in 2020 and 2021, given the strengthening demand. But from 2021 to 2024, with the increase in urea capacity in India and Africa, a surplus of 20 million tonnes will await the market.
Urea price forecast in global market
In order to provide a realistic forecast of the price of urea, we need to investigate the factors affecting the price of urea. According to data from 1980 to 2020, urea prices are highly correlated with oil prices, natural gas prices, coal prices, food price index, GDP, population and dollar value, The results indicate that the variables of crude oil, natural gas, coal, GDP per capita, population and food price index have a positive and high correlation with urea prices, i.e. with increasing each of these variables, the price of urea also increases. The exchange rate is negatively correlated with the price of Urea. Urea price fluctuations were relatively low until 2005, but after this period, the price has experienced sharper declines. The price of urea fertilizer in global markets after the 2008 economic crisis and from 2010 to 2012 was on a strong upward trajectory, reaching a record high of $513 in May 2012, From 2012 to August 2016, the price of urea in global markets fluctuated in a downpour phase. The main reason for this decline was the increase in supply in countries such as China due to lower production costs (falling natural gas and coal prices) as well as a decrease in demand due to factors such as drought that led to an increase in supply surplus. From 2016 to 2019, prices have taken a very mild upward trend, dropping from $142 a tonne to $245.
The price of urea, affected by the COVID-19 outbreak in May, reached at least three years, up 12 percent in the third season of 2020. The price increase came as a result of strong demand and increased costs of production inputs, especially energy. China’s main coal producers cut production to set a price floor, which also supported urea prices, The price of urea is expected to grow 13 percent to $259 in 2021. A mild uptrend is seen for the price of this product by 2024. This prediction is estimated through var and AR model methods. The average error magnitude criterion shows that the average predicted value of these two methods provides a better prediction of the price of this product.