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Rabobank Report: Structural Changes In Global Urea Market

NEW YORK, March 22, 2013 /PRNewswire/ -- Rabobank has published a new research report on the global urea industry, forecasting structural change in the global urea market due to capacity expansion by key importers and low-cost players in the Middle East and Africa regions. 

"Bursting the Urea Bubble," the report authored by Rabobank's global Food & Agribusiness Research and Advisory, predicts that global urea market is set to enter an era of oversupply post 2015, according to Rabobank. Unprecedented acceleration in urea capacity expansion by key importers (the U.S., Brazil and India) and low-cost producers in the Middle East and Africa (MEA) will drive structural changes. This capacity expansion is expected to improve the self-sufficiency of the top three importers and ensure that supply growth significantly outpaces demand growth, shifting the market into a buyers' market towards 2020. The competition among traditional exporters in the MEA, China and the former Soviet Union (FSU) will intensify, resulting in price pressure and capacity rationalisation in high-cost regions.

"Attractive returns in urea production have resulted in a spurt in capacity expansion projects since 2007," Rakhi Sehrawat, Rabobank analyst, commented. "The expansion is driven mainly by the exploitation of shale gas in the United States, new gas fields in Brazil, political incentives in India, and low-cost natural gas in the MEA. Over 65 new projects have been announced that will expand global urea capacity by 30 percent between now and 2020. This rush of activity on the supply side will have a strong influence on the urea demand/supply picture in the coming five to ten years."

The urea production boom will impact players across its value chain, especially high-cost producers and traders. As the import reliance of the main urea destination markets declines and low-cost export-oriented capacity grows, competition among the traditional players/exporters will intensify, resulting in price pressure and capacity rationalisation in high-cost regions. In this market, strategic routes of the urea value chain partners (i.e. producers and traders) would need to change to adapt to this new reality in the urea industry.

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