Iran’s urea price rises in global markets

According to Energy Press, urea can be considered one of the most important and key products in the food value chain, because urea affects the cost of all agricultural products. Accordingly, the government is always very sensitive to the price of urea, especially urea in the public sector. Until recently, the demands of this industry were not even recognized as government debts and no budget was allocated for it. Since last year, the demands have been recognized and it was decided that the government would collect the demands of this industry in exchange or in cash. However, according to the claims of urea manufacturers, there is still no news of payment of debts.
3% share of urea manufacturers in the capital market
Petrochemical companies producing urea and ammonia constitute a large part of the petrochemical industry in the capital market. These companies constitute about 3% of the total capital market and are considered among the most export-oriented petrochemicals. 77 percent of the total urea produced by the four petrochemical companies of Pardis, Shiraz, Khorasan and Kermanshah is sold in export markets.
Currently, 8 million tons of urea are produced in the country, of which 3 million tons are consumed domestically and 5 million tons are exported. The way urea is sold in the country is done in three ways. The first part is the amount of urea that is delivered to the Ministry of Agriculture and is priced by the Market Regulation Working Group, and the difference is subsidized to petrochemical companies, provided that they are audited by the Consumer Protection and Producers Organization. It is calculated as the difference between the set price and the lowest supply price for a 6-month period on the commodity exchange and is recorded in the government accounts. Currently, the claims of urea producers have not been paid since 2019. The second part is the sale of urea producers through the commodity exchange, which is done in rials, and the third part is related to the export sales of companies. The base price of urea on the commodity exchange is determined and announced weekly based on global rates by the Downstream Petrochemical Industries Development Office.
Poor performance of urea producers in November
The price of natural gas, as a raw material for urea production, is of great importance in the profitability of urea companies, and the increase in gas prices during 1401 and 1402 caused a sharp decrease in the profitability of the aforementioned companies. Unfortunately, urea production in Iran has been affected due to the decrease in natural gas.
Reports published in Kodal show that in November, petrochemical companies producing “ammonia and urea” had a poor performance. Khorasan’s production decreased by about 0.03 percent in November. Pardis Petrochemical experienced a 16 percent decrease in production in November, accounting for the largest production drop in this group. Also, Shiraz and Kermanshah petrochemical companies also had a production decrease of 11.5 and 3.1 percent, respectively.
Urea manufacturers’ profits grow by 10% in 1402
Announced statistics show that the total tonnage of urea manufacturers’ production and sales in the annual period during 1402 has experienced a 4% increase compared to 1401. Despite a 95% jump in 1401, urea manufacturers’ rial sales did not experience a good situation in 1402 and were recorded with a total decrease of 7%, reaching 82 trillion tomans. This decrease in dollar sales has become more critical, and urea manufacturers’ dollar sales were recorded with a 47% drop in the previous year to 1 billion and 808 million dollars. However, the profitability of urea manufacturers has improved well and has been increasing due to the boom in exports and the reduction in government-imposed urea costs. Accordingly, during 1402, the average profitability variables of urea manufacturers were recorded at 61%, which has improved compared to the annual average of 10%.
What’s up with the Iranian urea market?
A part of Iran’s production is going to export markets. Iranian export prices for January loading have increased to $307 per ton FOB, compared to previously between $303 and $304.5 per ton FOB.