Following the Indian tender, the international urea market experienced a deep correction. Since early May, prices in major global urea exporting regions have fallen across the board, with some markets seeing drops approaching $200/ton. Market focus has shifted from geopolitical risks to weak actual demand.
It is reported that the price decline exceeded market expectations. Baltic urea FOB prices plummeted by $160 to $180 in a single week, while Middle Eastern prices saw daily drops of $60 to $80. Mainstream quotes have fallen to the $700-$840/ton range, a significant drop from the April peak of $959/ton. Short-term market sentiment is bearish, with buyers generally adopting a wait-and-see attitude.
The fading geopolitical premium is the core driver of this price decline. Previously, escalating geopolitical conflicts in the Middle East disrupted navigation in the Strait of Hormuz, leading to supply disruptions from the Gulf countries, a key global urea export hub, and driving prices up. However, the situation has recently eased. Although the Strait of Hormuz remains under strict control, domestic production capacity in countries like Iran and Qatar is gradually recovering, rapidly narrowing the global urea supply gap. The previously accumulated geopolitical risk premium has gradually subsided, becoming the primary driver of price declines.
The over-consumption of demand by India, the world's largest urea importer, has further exacerbated downward pressure on prices. In April, Potash Corporation of India secured a record-breaking 2.5 million-ton urea purchase order at a staggering price of $935-959 per ton, setting a new record for both import volume and price in a single transaction. This move prematurely exhausted short-term global urea demand. Currently, India has no new procurement tender plans, and the temporary withdrawal of buyers—a core support for market demand—directly puts pressure on the demand side.
The combination of surging supply and the off-season for demand has become a significant factor contributing to the price decline. Since May, shipments from the Black Sea, Egypt, Algeria, and other regions have increased significantly, leading to a substantial increase in global urea supply and creating a supply-demand imbalance. Meanwhile, the global agricultural market entered its off-season in the second quarter, with weak purchasing intentions in major demand regions such as Brazil and Southeast Asia, leading to reduced fertilizer demand from farmers and further exacerbating the supply-demand imbalance in the market.
Furthermore, declining energy costs provided support for price drops. European natural gas prices have continued to fall recently, and since natural gas costs account for 70% to 90% of the production cost of gas-based urea, the decrease in production costs further weakened the support for high international urea prices. The resumption of production by some companies also further increased the total market supply.
Industry analysts believe that although international urea prices have fallen sharply, uncertainties surrounding the Strait of Hormuz's navigation and global energy price fluctuations have not been eliminated, and the market may maintain a volatile adjustment trend in the short term. While this price decline has alleviated the procurement cost pressure on some importing countries, it also reflects the fragility of the global urea market, which is affected by multiple factors including geopolitics, supply and demand, and energy. Future trends will require close monitoring of geopolitical situations and the procurement dynamics of major demand countries.
