Why does the domestic and international price difference reach 3,000 yuan per ton, causing the urea market to "split into two paths"?

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Source: Futures Daily

Under the ongoing disruptions caused by geopolitical conflicts, global urea prices are generally rising.

The latest quotes show that China’s offshore small granular urea is priced between $685 and $740 per ton, up $50 to $85 per ton from last week; Middle Eastern offshore small granular urea is at $700 to $730 per ton, up $25 to $60 per ton; Egypt’s offshore large granular urea is at $705 to $745 per ton, up $40 to $45 per ton; Brazil’s CFR large granular urea is at $660 to $740 per ton, up $50 to $60 per ton; Southeast Asia offshore large granular urea is at $740 to $760 per ton, up $10 to $55 from last week.

Yao Yao, a urea researcher at Xinhu Futures, said the core reason for this round of sharp international urea price increases is a significant and unpredictable supply gap.

“Iran and Qatar together have a urea capacity of about 15 million tons per year. Since the conflict erupted, their urea production facilities have been operating very unstably. Especially after Israel attacked Iran’s South Pars gas field last week, Iran was forced to shut down its urea plants again, and Iran’s counterattack damaged natural gas facilities in Qatar and other countries,” Yao Yao explained. More critically, as the “throat” of global fertilizer trade, shipping through the Strait of Hormuz has recently been at extremely low levels. Besides Iran and Qatar, exports from other Gulf countries like Saudi Arabia and the UAE are also severely hindered. The total export volume interrupted within the region due to plant shutdowns and shipping disruptions accounts for about 30% of global urea trade, creating a huge gap.

Xia Congcong, Chief Chemical Industry Researcher at Founder Zhongqi Futures, said the supply gap caused by this conflict could exceed 20 million tons, with an average monthly shortfall of over 2 million tons.

It is understood that Iran has now announced a ban on urea exports, and global shipping schedules for March are nearly sold out, with sources extremely tight. Amid the peak agricultural season in the Northern Hemisphere and multiple countries conducting procurement tenders, traders are eager to replenish stocks, jointly driving up urea prices.

Compared to the volatile overseas markets, the domestic urea market has been relatively rational.

Xia Congcong noted that the recent sharp rise in international urea prices has not yet been transmitted domestically. The increase in domestic urea futures prices yesterday was mainly influenced by a collective rally in the chemical sector, reflecting market sentiment.

Yao Yao analyzed that, from a fundamental perspective, China’s domestic urea market is self-sufficient, with almost all downstream demand met by domestic supply. Since 2026, relevant authorities have not issued any new export quotas, and international market fluctuations have not substantially affected domestic supply and demand.

It is worth noting that the current price difference between domestic and international urea has reached an astonishing level. Yao Yao calculated for Futures Daily: “Most domestic urea spot prices are below 2,000 yuan per ton, while FOB prices of small granular urea in China are $685–$740 per ton, which translates to a price gap of about 3,000 yuan per ton.”

In Xia Congcong’s view, the arbitrage window for urea exports is indeed open, but due to policy restrictions, domestic urea exports are difficult to loosen.

Looking ahead, both analysts believe that the international and domestic urea markets will continue to diverge.

Yao Yao stated that if geopolitical conflicts persist, and Iran and Qatar’s facilities cannot recover, and shipping through the Strait of Hormuz remains blocked, about one-third of the global urea supply will continue to be interrupted, and international urea prices are likely to continue rising.

For the domestic market, Yao Yao said it operates relatively independently, with the policy tone being “ensuring supply and stabilizing prices.” Recently, relevant departments have taken measures such as “accelerating reserve releases,” effectively ensuring market supply during the spring peak season.

Xia Congcong mentioned that domestic urea supply is ample, industry operating rates remain high, and agricultural demand in late March has weakened. Additionally, resistance to passing high prices downward exists, so prices around 1,950–2,000 yuan per ton may face pressure.