Material Insights · Understanding the Material World

Ammonium nitrate and Urea

Ammonium nitrate and urea are rival ways to deliver ammonia's nitrogen to crops: urea is more concentrated and often cheaper per unit of nitrogen, while ammonium nitrate loses far less to the air. Ammonium nitrate's use in explosives brings tight safety and security rules that urea does not face.

Ammonium nitrate (chemical) and Urea (chemical): 4 relationships.

How they are linked

1. Substitute nitrogen fertilisers

Substitution · Strong · Either can replace the other

Both supply nitrogen to the same crops, so farmers compare them per kilogram of nitrogen and by how much reaches the plant.

  • 46% and 34.5% nitrogen in urea and in ammonium nitrate
  • 22% and 2% average nitrogen lost as ammonia gas on arable land, urea and ammonium nitrate, Defra trials 2002 to 2005

Urea's higher nitrogen content makes it cheaper to ship and often cheaper per unit of nitrogen; a 2009 UK comparison found urea nitrogen up to 40% cheaper than ammonium nitrate nitrogen, depending on when it was bought. But surface-applied urea can lose much of its nitrogen as gas, with arable losses peaking at 43% in the trials, so the cheaper product per tonne of nitrogen is not always the cheaper one per unit taken up by the crop.

Sources: Farmers Weekly

2. Price link: substitute

Cost and price · Strong · Both ways

Because farmers can switch between them, their prices are kept in line per unit of nitrogen, and both carry ammonia and gas costs.

  • 0.27 monthly change correlation, Middle East urea with a US nitrogen fertiliser price proxy
  • 0.82 12-month change correlation, same series
  • 0.61 fitted elasticity

The yearly link is tight. The spread between them can widen when one market is hit on its own, for example by large import tenders for urea or by mining demand for explosives grade ammonium nitrate.

Sources: Material Insights (World Bank, FRED, IMF data)

3. Rival uses of ammonia

Substitution · Medium · Ammonia goes to one or the other

Both are made from ammonia: urea by reacting it with CO2, ammonium nitrate by first burning part of the ammonia to nitric acid and neutralising the acid with more ammonia.

  • about 55% of ammonia demand goes into urea
  • about 80% of nitric acid is used to make ammonium nitrate

A nitrogen producer with nitric acid capacity can choose which product to make from its ammonia. Urea is by far the larger outlet worldwide.

Sources: IEA

4. Explosives regulation

Policy · High in India · Applies to ammonium nitrate only

Ammonium nitrate is the main ingredient of commercial explosives for mining and construction, so its storage, sale and transport are licensed, while urea faces no such rules.

  • more than 45% ammonium nitrate by weight brings a mixture under India's rules
  • 500 m beyond the port area: where imported ammonium nitrate must be moved for storage, 2021 amendment
  • nearly 3,000 t ammonium nitrate in the 2020 Beirut port explosion

In India every activity involving ammonium nitrate needs a licence under the Ammonium Nitrate Rules, 2012, and the 2021 changes after Beirut added storage, handling and anti-pilferage rules, including import in bagged form only. In India farm nitrogen comes mainly from urea, whose use reached a record 38.8 Mt in 2024-25.

Sources: IEA; Drishti IAS; The Statesman; Rural Voice

For investors

Key learnings

  1. Urea and ammonium nitrate prices move closely over a year (0.82), so producers' choice between them depends on the spread per unit of nitrogen.
  2. Ammonium nitrate's much lower ammonia losses (2% against 22% for urea in UK trials) can justify a premium per unit of nitrogen where urea is surface-applied.
  3. Ammonium nitrate also sells into mining explosives, so its demand follows coal and metal mining as well as farming.

What to track

  • Urea and ammonium nitrate prices per tonne of nitrogen: A wide urea discount pushes farmers to switch (Monthly · trade press, World Bank Pink Sheet for urea)
  • Rules on urea use in Europe and the UK: Restrictions on unprotected urea favour ammonium nitrate (As notified · national agriculture ministries)
  • Mining activity and explosives demand: Rising blasting demand tightens ammonium nitrate supply (Monthly · coal and metal mine output data)

For policymakers

Key learnings

  1. Ammonium nitrate's explosive risk means storage and port rules, not just fertiliser policy, shape how much of it is used.
  2. Urea's large nitrogen losses to air are an environmental cost; ammonium nitrate avoids most of them but brings security risks.
  3. India's licensing regime treats ammonium nitrate first as an explosive, while farm nitrogen comes mainly from urea.

What to track

  • Ammonium nitrate storage licences and inspections: Shows how safety rules are being enforced after 2021 (Annual · PESO)
  • Urea consumption: Rising use deepens reliance on one nitrogen product (Monthly · Department of Fertilizers)
  • Ammonium nitrate imports at ports: Large stocks at ports signal safety exposure (Monthly · Ministry of Commerce trade data)

India

India regulates ammonium nitrate as an explosive under the Ammonium Nitrate Rules, 2012, tightened in 2021 after Beirut. Farm nitrogen comes mainly from urea, with a record 38.8 Mt used in 2024-25.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Nitrogen fertiliser choice must allow for urea volatility, Farmers Weekly (2009)
  3. Ammonia Technology Roadmap, IEA (2021)
  4. Rules for Ammonium Nitrate, Drishti IAS (2021)
  5. Govt amends ammonium nitrate rules to curb pilferage, The Statesman
  6. Urea shortage likely as consumption set to cross 40 million tonnes this year, Rural Voice (2025)