China has gone from being the World’s largest importer of urea to the largest exporter in less than two decades . In 2013, over 8m. tonnes of urea were exported. Profercy estimates that Chinese exports between April 2013 and March 2014 were over 9 million tonnes. 

China’s role in Q3 and Q4

The figures and the graph above exemplify the increasingly significant role Chinese urea has played in global markets in recent years.  The significance of these exports comes into greater focus as Q3 approaches.

While we are less than one month into Q2, market observers are already conscious that the low export tax window for Chinese product begins on 1st July. Current Chinese fob prices (taking into account the high tax rate) already suggest that prices for prilled urea could be much lower than in previous years (when the low was around 0pt fob China).  As a consequence of the tax window, Chinese exports have also been concentrated in the second half. In fact, 2013 saw over three quarters of all exports released in the second half of the year.

China’s emergence in recent years as a major player in world urea markets has had a notable impact on prices, which have trended down since 2011, with the second half witnessing the lowest prices. Put simply, in 2013 Chinese export growth outstripped  demand growth in major markets (representing 65% of world import demand). This was also the case in 2012 and global prices have suffered owing to this increased supply.

As a final thought, on 3rd April this year, Profercy’s quoted Yuzhnyy fob price was pt lower than early April 2013. If Chinese exports in second half 2014 match those of last year, this period may see much lower global prices than 2013.