The combination of new facility construction and high profits will lead to a downward shift in the profit range. The global urea production capacity growth rate maintained above 3% from 2021 to 2023, and it is expected to decrease to around 2% in 2024. China has many plans for new production, but specific timings are undecided, and the supply pressure in the second half of the year will be significantly higher than in the first half. With the current high profits, the anticipated commissioning of new facilities is expected to drive the urea production profit range downward, gradually transitioning the supply to a more relaxed state. Regarding raw materials, overall expectations indicate a loose situation for coal and natural gas, making it challenging to provide robust support for urea cost.
Export changes are limited, while domestic high demand may continue. In 2024, India is expected to commission a set of facilities with a capacity of 1.27 million tons, but the expected timing is after the third quarter. As a result, the increase in urea production in India will be limited. The overall changes in China's urea exports in 2024 are expected to be relatively limited, and their impact on domestic prices is more of a phased performance. In 2023, the increase in domestic urea demand was mainly from the agricultural sector, and it is expected to continue providing significant support in 2024.
The price center is expected to move downward, with a safe margin for long positions near the cost line. Urea blends have a higher profit-to-loss ratio and safety margin near the cost line. With current high profits and sustained high production levels, a considerable amount of capacity will be introduced next year. Demand is not expected to increase significantly, leading to a gradual compression of high profits and a potential downward shift in the price center. However, providing a certain profit to ensure supply is also relatively reasonable for companies.
China, as the world's largest urea producer and one of the largest exporters, has a capacity exceeding 77 million tons. In 2024, global added capacity will be concentrated in China, India, Russia, Egypt, and other countries, with a total estimated increment of 4.69 million tons and a growth rate of 1.96%. China added nearly 4 million tons of capacity in 2023, and the effective commissioned capacity in 2024 is expected to exceed 2 million tons, with pressure expected to be higher in the second half of the year.
Looking ahead to 2024, under the backdrop of food security strategy, agricultural demand is expected to steadily increase, and urea demand may still rise. However, with an overall surplus in the compound fertilizer market, companies have weak bargaining power. The increase in industry concentration, along with the periodic start and stop of compound fertilizer companies and their periodic raw material procurement demands, remains a crucial force driving the urea market periodically.
Attention: The above information is for commercial reference only due to the diversity of information collected, and Kelewell is not responsible for the authenticity of the data.
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