We maintain our 2023-2025F average Middle East urea price forecast at USD350/tonne. The average Middle East urea price in H1 2023 was USD340/tonne (-57% YoY). In July 2023, the average Middle East urea price bounced back 16% MoM to USD335/tonne from the H1 2023 low of ~USD260/tonne in late June. We forecast the average Middle East urea price will be USD350/tonne for the full-year 2023, implying a 5% higher price in H2 2023 vs H1 and relatively flat urea prices in the coming months. The driver for H2 2023 international urea prices should be the termination of the Black Sea Grain Initiative (see page 6) and India’s rice export ban (leading to higher grain/rice prices). These factors should outweigh the impact of increased supply from potentially higher urea exports from China, Russia and Europe. However, we expect the positive impact from the termination Black Sea Grain Initiative on urea prices will fade starting from 2024. Other major exporters of grains (e.g., the US, Canada, and Brazil, among others) could increase their grain production, thereby increasing their grain exports. This additional amount should cover Ukraine’s shortfall of grain exports, which could normalize grain prices and thus have a neutral impact on urea prices. Industry players also believe the positive impact from the termination of the Black Sea Initiative was partly reflected in higher urea prices in July 2023. Therefore, we keep our urea price forecast for 2024-2025F unchanged at USD350/tonne.

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