Bloomberg News has recently reported that the Chinese government has issued an order to domestic fertilizer companies, instructing them to halt the export of urea. According to sources familiar with the matter, several prominent Chinese fertilizer manufacturers have refrained from signing new export contracts since the beginning of this month, as per the government’s directive.
Bloomberg further states that “at least one producer has publicly announced plans to reduce fertilizer exports.” This development comes after the futures prices of factor futures on China’s Zhangzhou Commodity Exchange experienced a 50 percent surge over a seven-week period between mid-June and late July, followed by fluctuations.
It is believed that the increase in urea prices can be attributed to a decrease in inventories within China and an uptick in exports. Experts suggest that the demand for fertilizer has risen due to abnormal weather conditions, leading to an increase in fertilizer usage for crops like soybeans and corn during the first half of this year.
China holds the position of the largest producer and consumer of urea globally. Consequently, a sudden decline in urea exports from China may result in shortages or price hikes in urea and related products, including urea water, in various parts of the world. Notable importers of Chinese urea include India, Korea, Myanmar, and Australia.
Despite Bloomberg’s report, China’s Ministry of Commerce and National Development and Reform Commission have refrained from making immediate comments. Bloomberg also highlights that the already volatile global agricultural market may face further destabilization due to unpredictable weather patterns, India’s export restrictions, and Russia’s invasion of Ukraine.
Urea, derived from ammonia extracted from coal, serves various purposes such as reducing diesel vehicle emissions, acting as an agricultural fertilizer, and functioning as carbon reduction equipment for coal-fired power plants.
In October 2021, South Korea experienced a shortage of urea water due to China’s restrictions on urea exports, driven by soaring coal prices. During this period, the price of urea solution surged more than tenfold, causing drivers to face difficulties in procuring it. However, the crisis was resolved within a span of two months when China permitted exports through intergovernmental negotiations.
Subsequently, the Korean government has been actively pursuing the diversification of urea import sources. However, the share of Chinese urea imports decreased from 71.2% in 2021 to 66.5% the following year, only to rise again to 89.3% in the first half of this year.
Overall, the halt in urea exports from China sheds light on the potential impacts on the global agricultural market, as well as the need for countries to diversify their sources of urea imports to prevent future supply disruptions.
Bloomberg: No new contracts as of the start of this month
On November 25, 2021, the number of items purchased by domestic consumers through direct purchase are piled up at the Customs Express Logistics Center of the Incheon Headquarters in Jung-gu, Incheon. Kyunghyang Shinmun
Bloomberg News reported on the 7th that the Chinese government has ordered domestic fertilizer companies to stop exporting urea.
Bloomberg, citing sources familiar with the matter, said a number of major Chinese fertilizer manufacturers had not signed new export contracts since the beginning of this month, following instructions from the Chinese government.
“At least one producer has publicly announced plans to reduce fertilizer exports,” Bloomberg reported.
On China’s Zhangzhou Commodity Exchange, factor futures prices surged 50 percent in seven weeks from mid-June to late July, then fluctuated repeatedly, Bloomberg reported.
Local experts believe that urea prices have risen as inventories in China have fallen and exports have increased. A local expert explained, “As the demand for fertilizer increased after the abnormal climate, the use of fertilizer in crops such as soybeans and corn would have increased during the first half of this year.”
China is the world’s largest producer and consumer of urea, and a sudden drop in China’s urea exports could cause shortages or price increases in urea and related products, such as urea water, in many parts of the world. The largest importers of Chinese urea are India, Korea, Myanmar and Australia.
China’s Ministry of Commerce and National Development and Reform Commission did not immediately comment on the report, Bloomberg reported.
Bloomberg pointed out that abnormal weather, India’s export restrictions, and Russia’s invasion of Ukraine will be another destabilizing factor in the already volatile global agricultural market.
Urea produced from ammonia extracted from coal is used to reduce diesel vehicle emissions, agricultural fertilizer, and carbon reduction devices for coal-fired power plants.
In October 2021, South Korea suffered a urea water shortage as China restricted urea exports due to rising coal prices. At that time, the price of urea solution rose more than 10 times, and it was worth calling, and drivers stopped because they could not find urea solution. The urea crisis was resolved in about two months when China allowed exports through intergovernmental negotiations.
Since then the Korean government has pushed for the diversification of urea import sources, but the share of Chinese urea imports fell from 71.2% in 2021 to 66.5% the following year, then rose again to 89.3% in the first half of this year.
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