We maintain our average Middle East urea price forecast for 2024F at USD320/tonne (-10.5% vs 2023 and ~20% higher vs the pre-COVID level). The average Middle east urea price in H1 2024 was USD326/tonnes (-4% YoY), which implies a closely similar price in H2 vs H1. From our understanding, the 2024 lower YoY international urea prices are due to 1) lower demand from key import markets given the diminished planting activities due to the continued impact of El Niño and geopolitical tensions, and 2) lower input costs (coal & gas prices).

We maintain our forecast for the average Middle East urea price in 2025F at USD350/tonne and USD330/tonne for 2026/27/28F. According to industry players, the urea price could rebound ~9% in 2025. The International Energy Agency (IEA) recently raised its 2024 average gas price forecast by 14% in July’s report vs April’s report. Industry players also expect a YoY higher gas price in 2025 vs 2024 which might weigh on European urea supply and support the urea price. In addition, according to Yara (one of the leading fertilizer companies in the world), global urea capacity expansion (excluding China) already peaked in 2022 at 6.2 million tons per annum (TPA). It is expected to reduce to 2.7 million TPA and 0.4 million TPA in 2024F and 2025F, respectively. In other words, even when China lifts its urea export restrictions in early 2025 and Russia returns to export more in the new quota, global urea supply might not increase substantially. 

We maintain our urea average selling prices (ASP) assumptions for both DPM and DCM at a premium (vs Middle east urea price) of 20% in 2024F but lower DCM’s premium to 15% in 2025-2028F following the similar ASP of these two companies in H1 2024. Additionally, although we still maintain our expectation that DCM’s ASP will outperform DPM’s in the long-run from 2025-2028F due to its more modern and easier-to-export granular urea products, we lower its ASP premium from 17% to 15%, while maintain DPM’s at 10%.

Powered by Froala Editor