Friday’s Insider: Why does China export less urea
As the world’s largest producer of urea, China’s export policies have far-reaching implications for agricultural and industrial sectors worldwide. However, in recent years, China has significantly reduced its urea exports, a move that has raised questions and concerns among global markets. Let’s delve into the reasons behind China’s reduced urea exports, examining the domestic and international factors influencing these policy decisions.
Two main topics dominated the urea market last week: the stoppage of production in Egypt due to a lack of gas supply, and China’s informal introduction of a ban on urea exports, which saw international prices continue to escalate. This made me wonder: could it happen that China will not export any major quantities of urea in the second half of 2024?
Comparing Chinese export statistics over the last five years, it is evident that the country exports less urea. In the first five months of 2024, China exported 1.17 million metric tonnes, compared to 2.5 million metric tonnes in 2023, 2.8 million metric tonnes in 2022, 2.9 million metric tonnes in 2021, and 3.1 million metric tonnes in 2020.
One of the primary reasons for China’s potential halt in urea exports is the need to ensure adequate domestic supply. China produces about 50 million tonnes of urea annually, and maintaining sufficient stocks for its own agricultural needs is crucial, especially during peak planting seasons. By restricting exports, China aims to prevent shortages that could lead to soaring domestic prices and disrupt local agricultural activities.
Could China also be considering the environmental impact of urea production? In the past, old coal-based factories were shut down due to environmental concerns. China’s decision to halt urea exports may also be influenced by policies aimed at reducing industrial emissions and promoting sustainable agricultural practices. Urea production is energy-intensive and contributes to greenhouse gas emissions. By limiting exports, China can better control the environmental impact of its fertilizer industry and align with broader sustainability goals.
The potential reduction or cessation of Chinese urea exports will have significant implications for global markets. Countries like India, a major market for Chinese exporters, would definitely welcome the presence of Chinese urea in the market.
China’s focus on domestic stability, environmental sustainability, and strategic resource management underpins the possibility of a significant reduction or halt in urea exports in 2024. Traders will need to play carefully in the second half of 2024. Remember, this market doesn’t buy the tonnes; it buys news and expectations.
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About the Author of “Friday’s Insider”: Ilya Motorygin is the co-founder of GG-Trading and brings 30 years of experience to the fertilizer industry. Renowned for his comprehensive problem-solving skills, Ilya expertly manages deals from inception to completion, overseeing aspects such as financing, supply chains, and logistics.
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