Urea is an essential nitrogen fertilizer and a source of ureic nitrogen, with a 46% nitrogen content. In addition to ureic nitrogen, plants can absorb nitrogen in the forms of nitrate and ammoniacal nitrogen, or a combination of these three forms. Nitrogen is a vital macronutrient for all living organisms. Urea can be used either as a straight fertilizer or as a component in complex NPK fertilizers. Its conversion into the ammonium form and subsequently into the nitrate form is a slow process, which is characterised by susceptibility to volatilization, leaching, denitrification, low soil temperatures, and dry soil surface conditions. Consequently, urea application should be avoided during dry summer months and is more effective in moist soils.
The current method of urea production involves the reaction of carbon dioxide and ammonia. These are first converted into ammonium carbamate, which is then dehydrated to produce urea. Ammonia is primarily synthesized using natural gas, coal, and, less commonly, heavy oil. Coal is a traditional feedstock for ammonia synthesis in China, where oil and natural gas resources are limited. Beyond agriculture, urea is also utilized in a variety of industrial applications.
It is important to note that the excessive use of nitrogen fertilizers, combined with inefficiencies in their application, can have significant environmental impacts. These impacts contribute to issues such as climate change, reactive nitrogen pollution, soil degradation, eutrophication of water bodies, loss of biodiversity, and human-induced disruptions to the nitrogen cycle. As a result, the use of controlled-release fertilizers, along with other sustainable practices, has been recommended.
In 2024, demand for urea fertilizers is projected to reach 183 million metric tonnes by product, or approximately 84 million metric tonnes by nitrogen nutrient. Overall, global consumption and production of nitrogen fertilizers (including urea) have remained nearly flat for the past decade, stabilizing at a level slightly exceeding 109 million metric tonnes by nitrogen nutrient. This figure encompasses all types of nitrogen fertilizers. However, in 2024, the potential supply of urea fertilizer alone is estimated at 203 million metric tonnes, while the total urea production capacity surpasses 230 million metric tonnes (or 106 million metric tonnes by nitrogen nutrient, according to the International Fertilizer Association). This indicates the presence of surplus urea volumes in the market.
Urea: Structure of the global production capacity by region
East Asia holds the largest share of urea production, manufacturing 70 million metric tonnes per year by product. East Asia is followed by South Asia and West Asia with annual production of 35 million and 25 million metric tonnes by product, respectively. Both global urea exports and imports amount to 53 million metric tonnes by product. East Asia is also the largest consumer of urea, with an annual consumption of about 68 million metric tonnes by product. West Asia is the leading exporter of urea, exporting approximately 21 million metric tonnes per year by product. Key urea-exporting countries in West Asia include Qatar, Saudi Arabia, Iran, Oman, and the United Arab Emirates.
Urea prices fluctuate significantly on both a monthly and annual basis, influenced by factors such as the supply-demand balance, export, and import dynamics (e.g., the loosening and subsequent restriction of urea exports in China during Q2 and Q3 2024, respectively), regional agricultural policies and practices, seasonality, specific crop and weather conditions, and various PESTEL factors, including geopolitical instability. For instance, urea prices dropped from an all-time high of USD 1,050 per metric tonne in Q2 2022 to an average of USD 313 per metric tonne (FOB, Arab Gulf) or the current USD 319-330 per metric tonne (Black Sea, spot price). Another indicator of urea price trends is the FAO Food Price Index, which recorded a 6% decrease in Q2 2024 compared to the same period in 2023, reflecting a corresponding decline in urea prices during that timeframe.
In Q3 2024, the decline in urea prices across various regions (e.g., the USA) largely stabilized. This was driven by strong demand, the early start of the agricultural season, stable crop acreage, limited urea supply from certain regions (particularly China), and other contributing factors. The U.S. urea market is dominated by several key companies, including CF Industries (production capacity: 6.21 million metric tonnes per year), Nutrien (2.02 million metric tonnes), Koch Inc. (1.65 million metric tonnes), and Iowa Fertilizer (1.12 million metric tonnes). Notably, Iowa Fertilizer, previously a wholly owned subsidiary of the Netherlands-based OCI N.V., was acquired in 2024 by Koch Inc., specifically through Koch Ag & Energy Solutions.
Find a detailed analysis of the urea market in the in-demand research report “Urea: 2024 World Market Outlook and Forecast up to 2033”