Urea market expected to remain tight in 2026

SASKATOON — Nitrogen fertilizer markets continue to be tight in 2026, says a major manufacturer of the product.

There is strong seasonal demand heading into the Northern Hemisphere spring, said Magnus Krogh Ankarstrand, executive vice-president of Yara International.

Impressive sales in India have triggered demand for more imports in that important market.

India’s urea sales were a record high 5.8 million tonnes in December, an 11 per cent increase over the same month a year ago.

There is also a lack of exports out of China due to government restrictions, he told investors during the company’s fourth quarter 2025 results webinar.

China exported 4.9 million tonnes of the fertilizer product in 2025, up from a mere 300,000 tonnes a year earlier.

Those supplies were needed to help cover a global deficit of the product. However, China is once again restricting sales in 2026.

Why it Matters: Urea is the most popular fertilizer in Western Canada.

Off-season imports of nitrogen fertilizer is up slightly in the United States and the European Union, but more is needed for the upcoming growing season.

The peak of urea capacity additions (excluding China) happened when 4.5 million tonnes was added in 2023. That compares to 300,000 tonnes added in 2025.

Average consumption growth is expected to outpace capacity growth in three of the next five years.

“Combined with supportive demand fundamentals, this indicates a continued tight global supply and demand balance in the coming years,” said Ankarstrand.

Owen Gooch, senior urea analyst with Argus Media, said global urea prices have been on the rise in January and February, soaring US$60 per tonne in the Middle East in January alone.

“A big part of this story was India,” he said during a recent webinar hosted by Argus.

India fell well short of its 1.5 million tonne procurement target in its Jan. 2 tender, managing to only secure 971,750 tonnes of urea.

The country announced another 1.5 million tonne tender in February. Results of that tender have not yet been published but it shows strong buying interest from the world’s largest importer.

North America and other buyers are stepping into the market earlier than anticipated so they can compete with India in securing product.

Gooch said cutbacks to Iran’s supply have been more severe than expected, with only one plant operating in the country.

Another key exporter is also cutting back.

“Chinese urea has all but disappeared from the market,” he said.

Producers in South Asia and Southeast Asia are not doing much to reduce price pressure. Indonesia limited export availability in January as domestic demand took priority.

Non-market factors are also contributing to the urea price spike as the possibility of U.S. military action against Iran threatens Middle Eastern supply.

The good news for farmers around the world is that the worst is probably over.

“Our view at Argus Consulting is that most of the price appreciation has already taken place in Q1,” said Gooch.

He thinks prices will peak in late February or early March and then subside despite continued robust demand in key import regions.