Weak urea pricing is taking its toll on Chinese urea producers and the closure rate increased 2.7million t/y in 2015. CRU estimates that China has now closed 8.5 million tonnes of annual urea capacity since 2013 at an average rate of 2.5 million t/y. China is not the only producer being squeezed by $200/t urea; Kuwait based PIC has decided to close its 1.1 million t/y urea plant by 2017. Given Kuwait's cheap gas supply it is highly unlikely the plant would have been losing money. However, the government looks to have decided that there are better returns to be made from its finite gas reserves in other downstream industries than the urea market. Or perhaps that the gas is worth more to nation left in the ground to extend reserve life.
CRU is now forecasting oil to be $36/bbl in 2016 and we have lowered our forecast of urea prices in 2016 and 2017, to just under $200/t FOB Black Sea. This new forecast prices in weaker oil and gas markets than CRU had been expecting (we had forecast oil to stabilise at $50/bbl this yea, an eventuality that now looks very unlikely!) However, the Chinese closure rate discussed above is a positive development, and our forecast for Black Sea prices in 2020 is more-or-less unchanged at $270/t.

Executive Summary 1

Conclusion 1

      1. Key changes since December 2015 2

      2. Main risks to outlook 3

Highlights in this Market Outlook 3

Chapter 1 - Demand 15

1.1 Overview of global urea demand 15

      1.1.1 Revisions to the Demand Forecast 16

1.2 Agricultural Market Overview 17

      1.2.1 Short and medium term considerations 18

1.3 Regional Assessment of urea demand 24

      1.3.1 Americas 24

      1.3.2 Europe and CIS 30

      1.3.3 Asia 31

Chapter 2 - Supply 39

2.1 Global Urea Supply 40

2.2 Urea supply by region 43

      2.2.1 China 44

      2.2.2 CIS 50

      2.2.3 North America 51

      2.2.4 Africa 52

      2.2.5 Middle East 54

      2.2.6 South Asia 60

      2.2.7 Central and South America 62

      2.2.8 South-East Asia & Oceania 63

2.3 Feedstock Prices and Urea Production Costs 65

      2.3.1 Natural Gas Overview 65

      2.3.2 Ukrainian Gas Pricing 67

      2.3.3 Urea Export Costs, 2016 basis 68

2.4 CRU Committed Capacity Forecasts 69

Chapter 3 - Trade, Balance and Prices 71

Overview 71

      3.1 Global Trade 72

      3.2 Regional trade outlook 73

      3.2.1 China 73

      3.2.2 CIS 74

      3.2.3 Middle East 75

      3.2.4 South East Asia 75

      3.2.5 South Asia 76

      3.2.6 North America 77

      3.2.7 Latin America 78

      3.2.8 Africa 79

      3.2.9 Europe 79

Appendices

Appendix A - The Long Term Outlook for the Urea Market 81

A.1 The long-term outlook for urea demand 82

A.2 Urea gap analysis 92

A.3 Long-term guidance: CRU's LRMC methodology 93

A.4 Choice of regions for LRMC 95

A.5 LRMC base year: 2013$ 96

A.6 LRMC inflation indexes 98

A.7 Long-run marginal cost forecast, 2013-2040 101

Appendix B - Nitrogen Fertilizer Consumption 105

Appendix C - Urea Consumption 109

Appendix D - Urea Production 113

Appendix E - Urea - Gross Capacity 115

Appendix F - Urea - Net Capacity 117

Appendix G - Urea Imports 119

Appendix H - Urea Exports 122

Appendix I - Urea Trade Matrices ONLINE

Appendix J - Urea Prices ONLINE

Appendix K - Economic Outlook ONLINE

1. Overview ONLINE

2. Exchange rates ONLINE

3. Macroeconomic outlook ONLINE

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