Urea prices stabilize after Hormuz shock as India tender resets global benchmark

The urea market has moved from crisis pricing to cautious stabilization over the past two months. Prices that surged past $850/mt in April after the Hormuz closure have settled into a $410-440/mt CFR range globally, according to the AFC weekly assessment from early July. The correction reflects partial supply restoration from Qatar and Iran, but the market remains structurally tighter than at any point since the 2022 energy crisis.

How the Hormuz crisis reshaped supply

The Strait of Hormuz closure in late February 2026 effectively halted an estimated 33% of the global fertilizer supply chain, per World Bank analysis. Middle East annual urea exports of approximately 22 Mt were stranded at the peak. QatarEnergy's QAFCO, operator of one of the world's largest urea plants at 5.6 Mt/yr, suspended ammonia and urea production in March after LNG infrastructure damage. The plant restarted in early May, but shipping through the strait remains constrained by elevated war risk premiums and reduced tanker availability.

Five Gulf exporters — Iran, Qatar, Saudi Arabia, the UAE, and Bahrain — supplied roughly 34% of global urea trade in 2024, per ICIS data. At the worst point of the disruption, more than half of Middle East output was effectively lost. Iran's production remains mixed, with some plants operational and others still offline due to feedstock shortages. Oman and UAE plants have been running well, while Bahrain's GPIC operates at reduced rates.

The World Bank projects 2026 average urea prices around $700/mt, representing a 60% year-on-year increase. The April spike was the highest since mid-2022, when the Russia-Ukraine conflict drove a similar supply crisis.

India's NFL tender resets the benchmark

India's latest National Fertilizers Limited (NFL) tender attracted landed bids in the range of $444.90-449.30/mt CFR, according to trader reports. This is roughly half the April crisis peak near $900/mt CFR and signals that import demand remains robust at current levels. Indian buyers, who typically procure 8-10 Mt of urea annually through tenders, have used the post-crisis price dip to cover near-term requirements.

Chinese export dynamics add another layer of complexity. China's domestic floor prices sit around $420/t FOB for prilled urea and $430/t FOB for granular urea, but only for non-India destinations. Chinese export restrictions remain in place, with the government prioritizing domestic supply for the spring and summer planting seasons. IMARC's July assessment shows Northeast Asia urea at approximately $320/mt, while African buyers face prices near $660/mt CFR, highlighting persistent regional disparities.

European production under pressure

European ammonia and urea producers continue to operate under structurally unfavorable economics. Yara reported a 15% rise in European Q2 2026 gas costs, reinforcing the shift toward lower-cost production regions, notably the US and Trinidad. The European Commission's Fertiliser Action Plan notes that EU mineral fertilizer output remains 10-15% below pre-2022 levels, a gap that has not fully closed despite three years of adjustment.

Platts estimates the cost of domestic European ammonia production at approximately $697/mt as of early March, above import prices of $690/mt CFR NWE. When the Carbon Border Adjustment Mechanism (CBAM) is included for higher-carbon cargoes, the effective import cost rises to roughly $750/mt, close to spot deal levels. This cost structure means European urea buyers will remain reliant on imports for the foreseeable future.

Forward outlook: three scenarios

Bull case: Full normalization of Hormuz transit by Q4 2026 would add 15-20 Mt of urea supply back into the global market, driving CFR prices back toward the $350-400/mt range. Chinese export restrictions are scheduled for review in August 2026, and early relaxation could add further downside.

Bear case: Renewed Middle East escalation, particularly involving Iranian production infrastructure, could remove another 5-8 Mt of supply. The World Bank's 2026 projection of $700/mt average may prove conservative if the crisis deepens. European gas prices heading into winter 2026-27 add another upside catalyst.

Base case: Prices hold in the $400-480/mt CFR range through Q3 2026, with gradual downside toward $380-420/mt by year-end as Middle East supply normalizes and Chinese export policy becomes clearer. Indian and Brazilian demand will provide a floor.