In the production process of nitrogen fertilizers, natural gas is a fundamental raw material for ammonia, which in turn gives rise to urea, thus having a great correlation between fuel and fertilizer prices.  With the war against Ukraine, Russia, responsible for supplying about 40% of the gas consumed in Europe, restricted the flow to the continent, which led to further international price increases in the short term, surpassing historical highs

As a part, according to GlobalFert data, an alert has been sparked in energy-dependent countries, as well as nitrogen producers.

Further aggravating the situation in recent weeks, following the announcement of a stop for maintenance on the turbine of the important Nord Stream-1 gas pipeline, which flows gas into Europe, the nitrogen market responded rapidly, reflecting rising urea prices.

With the risk of disruption of raw material supply, European countries migrated their demand to North Africa, which passed on increased demand and high natural gas prices to consumers. Thus, urea showed highs in the international market over two weeks.

"However, with the volatility of the fertilizer market, urea may still show a decline, influenced by its high supply and low seasonal demand, factors that are not supported by high natural gas values. As in the last week, when India launched an auction to buy 500,000 tons of urea, below the expected 1.5 million. The offers received were between 517 and 600 USD/t, showing a drop in prices caused by the signaling of low demand from one of the world's largest consumers,' globalfert said.

Although it is a factor that influences the rise of nitrogen fertilizers, the geopolitical conflicts that cause fluctuations in the price of natural gas should not reverse the period of fertilizer spree.This is because, after the long period of the sector's rise that has made the exchange relationship unfavorable between agricultural commodities and the insums, demand should be lower than expected, putting pressure on prices.

Source: RPA news