Urea: Cycles

Why every urea spike since 1973 has reversed

Urea is the most volatile nitrogen product. Prices spike when the gas floor jumps (2008, 2021-22) or export supply is cut (China's curbs from late 2021, Hormuz in 2026), and each World Bank spike above $780/t has reversed within one to two years as plants restart and buyers cut application. The floor is the cash cost of the marginal exporter; the ceiling is demand destruction, which is weak in India because farm prices are fixed. India's tenders and China's export quotas are the two biggest swing factors.

September 2026: World Bank urea $407.5/t minus about $60/t US gas cost gives about $345/t for a US plant; a European plant on $25.42/MMBtu gas was underwater by about $70-150/t (basis: 19-22 MMBtu per t, indicative).

Booms and busts

1. 1973-1976

   Oil shock, grain boom and capacity shortfall; new plants and falling grain prices then broke the market.

   World Bank urea rose from $16/t (Jan 1971) to $285.8/t (Jan 1974), then $168/t (Jan 1975)

2. 2006-2009

   Biofuel-driven grain boom, high energy, Chinese export taxes; the financial crisis then cut demand.

   World Bank urea rose from $202.3/t (Jan 2006) to $785/t (Aug 2008), then $240/t (Dec 2008)

3. 2015-2016

   New capacity in the US, Middle East and China, and Chinese exports, flooded the market; prices fell to a decade low.

   World Bank urea fell from $264/t (Dec 2015) to $142.6/t (Jun 2016)

4. 2021-2023

   European gas rose about tenfold; China restricted exports from October 2021; Russia invaded Ukraine.

   World Bank urea rose from $265/t (Jan 2021) to a record $925/t (Apr 2022), then $287.5/t (Jun 2023)

5. 2026

   Shipping through Hormuz largely stopped after the war with Iran began on 28 Feb 2026; CRU estimated 55-60% of Middle East urea output was halted by April. China released export quotas in June, and prices fell after a memorandum on 17 June, following the 8 April ceasefire, let some stranded cargoes out. Fighting resumed in July; by October oil flows through the strait were about 82% of pre-war, with renewed attacks and Brent near $110 (Reuters/Kpler).

   World Bank urea rose from $415.4/t (Jan 2026) to $856.9/t (Apr 2026), then $400/t (Jul) and $407.5/t (Sep)

What drives the cycle

• Natural gas prices. Gas is 72-85% of ammonia cost; when TTF jumps, European plants shut and the floor rises.
• Chinese export quotas. China makes about a third of world urea; quotas decide whether about 5 Mt a year reaches the market.
• Indian tender size and timing. India imported 10.38 Mt in FY2026; tenders of 1-2 Mt reset Middle East prices.
• Gulf export routes (Hormuz). About 40% of seaborne urea passes Hormuz; the 2026 disruption doubled prices within two months.
• Grain prices and planted area. US corn (38.5 Mha in 2025), Brazilian soy-maize and Australian wheat decide import demand; high 2026 prices cut Australian wheat area about 12% (Kpler).

Metrics to track