We raise our average Middle East urea price forecast for 2023F from USD350/tonne to USD360/tonne (78% of the pre-Russia-Ukraine conflict level and 136% of the pre-COVID level). The Middle East urea futures price has bounced back to ~USD380/tonne in mid-November from its bottom of ~USD260/tonne in late June. We forecast an average Middle East urea price of USD384/tonne in Q4 (+5% QoQ). In our view, the drivers for higher international urea prices in Q4 2023 vs Q3 should be China’s urea export restrictions announced in September and Russia’s extension of export quotas on nitrogen fertilizers until end-2024. The positive effects of the Black Sea Grain Initiative termination in July 2023 on urea prices have faded away from August.

We raise our average Middle East urea price forecast for 2024F from USD350/tonne to USD370/tonne (+3% YoY). We expect that China’s urea export restrictions (to stabilize the Chinese urea market) and potentially lower urea exports from the EU (based on the International Energy Agency’s forecast for increased EU gas prices YoY) will support urea prices in 2024, outweighing slightly higher YoY urea exports from Russia.

Meanwhile, we maintain our forecast for the average Middle East urea price in 2025F/2026-2027F at USD350/330 per tonne, respectively, and forecast the average price for 2028F at USD330/tonne due to our expectation for a further normalization after the disruptions caused by the start of the Russia-Ukraine conflict.

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