Geopolitical conflicts have significantly disrupted global energy supplies and key maritime shipping routes, profoundly reshaping the trade patterns, production costs, and price structures of the global urea market. This has resulted in a stark contrast between domestic and international market conditions. International urea prices have surged, currently approaching 6,000 RMB per ton. In contrast, China's domestic prices remain stable due to export restrictions, creating a substantial price gap. Chinese urea has become a global price洼地, with potential export profits exceeding 3,000 RMB per ton.
The Persian Gulf region, the world's largest urea export area accounting for nearly 30% of global exports, has already experienced some impact on production. If tensions persist, the region's annual output could decrease by approximately 7 million tons. India, a core buyer of Middle Eastern urea with high import dependency, will face direct impacts on its imports, which may be reduced by about 3.15 million tons within the year. Concurrently, India's own urea production faces severe challenges due to shortages of natural gas feedstock, with nearly 50% of its imports sourced from Qatar. Given that gas-based urea plants account for 90% of India's capacity, production could fall by 5 to 8 million tons by 2026.
The conflicts have also influenced global natural gas prices, driving up production costs for gas-based urea. International production costs for gas-based urea now far exceed the costs of China's coal-based urea. Although China provides some preferential natural gas supply for its gas-based urea plants, the potential price increase for non-planned gas supplies will exert cost pressures on its urea production.
**1. The Domestic-International Urea Divide** Since the outbreak of the US-Iran conflict, the price gap between domestic and international urea has widened dramatically. Due to energy disruptions and blocked urea export routes from the Middle East, international urea prices in the region have reached nearly $900 per ton, a surge of about 80%. Recent Indian urea tender prices have even reached nearly 6,500 RMB per ton. Meanwhile, China's domestic urea prices have remained relatively stable, standing in sharp contrast to other chemical products that have followed the sharp rise in international energy prices.
Currently, despite rumors of eased restrictions, China's urea exports have not been officially granted new quotas. International prices are nearly three times the domestic price, creating a potential export profit exceeding 3,000 RMB per ton, an absolute historical high. China's urea price has become the lowest globally.
**2. Impact of Geopolitics on Middle Eastern Urea Production and Trade** The Gulf region's urea capacity is approximately 35 million tons, representing about 16% of global capacity. Its exports exceed 16.5 million tons, making it one of the largest export regions, accounting for nearly 30% of global exports. Due to geopolitical conflicts damaging oil and gas facilities in the Middle East, if urea plant utilization rates fall by 20%, production could decrease by approximately 7 million tons.
Qatar's urea production is 6.8 million tons, with exports around 5.4 million tons. India is a key destination for Middle Eastern urea exports. In 2025, India's urea production reached 32 million tons, while its imports exceeded 8 million tons, with about 45% sourced from Saudi Arabia, Oman, the UAE, and Qatar. If Gulf production falls by 7 million tons, India's urea imports could be reduced by approximately 3.15 million tons.
In early April, India issued a new urea import tender, planning to purchase 1.5 million tons for the west coast and 1 million tons for the east coast. Cumulative bids from traders totaled about 5.9 million tons. On April 16, IPL issued counter-offers to bidders, with the lowest CFR offers at $959 per ton for the east coast and $935 for the west coast. By late March 2026, India's urea inventory was approximately 5.3 million tons, a 10% decrease from pre-conflict levels. With the monsoon season arriving and low inventory, India's tender volumes for urea may be higher than usual.
**3. Natural Gas Shortages May Constrain Global Gas-Based Urea Production** The Gulf region is not only a major global oil supplier but also a significant source of natural gas. Qatar and Oman together account for about a quarter of global natural gas exports. Qatar's gas resources primarily come from the North-South Pars gas field, the world's largest known single gas field.
China's dependence on natural gas imports is about 40%. Its imports are split between pipeline gas (40%) and liquefied natural gas (60%). Russia and Turkmenistan are the main sources for pipeline gas, while Australia, Qatar, Russia, and Malaysia are key LNG suppliers.
China sources nearly 30% of its LNG from Qatar, accounting for about 18% of its total natural gas imports. Due to the US-Iran conflict, seaborne LNG imports have fallen by nearly 20% year-on-year. If the Strait of Hormuz remains closed to gas transport for an extended period, China's annual natural gas imports could decline by 15-20%.
India's natural gas import dependency is 50%, making it the world's fourth-largest LNG importer. For India, Qatar is the largest source, accounting for nearly half of its imports. Unlike China, where urea production is primarily coal-based, 90% of India's urea plants rely on natural gas. Therefore, disruptions to Qatar's gas exports significantly impact India's urea production. Some foreign media report that gas supply to Indian urea plants has already fallen to 70% of February levels. If this continues, India's urea production could drop by 5 to 8 million tons by 2026.
**4. Disruptions to Feedstock Supply for Gas-Based Urea** Producing one ton of urea requires approximately 650-700 cubic meters of natural gas. At a price of 100 pence per therm (equivalent to 3.28 RMB per cubic meter), this feedstock cost is 624 RMB per ton (41%) higher than in China. Factoring in labor, electricity, and other costs, the total production cost for international gas-based urea likely exceeds 3,000 RMB per ton.
**5. Conclusion and Outlook** The impact of geopolitical tensions on the urea trade landscape is twofold: the Middle East is both a major urea exporter and a critical exporter of natural gas, the primary feedstock for urea production. If tensions persist, Middle Eastern urea exports could decrease by 6 to 8 million tons. Due to natural gas import shortages, India's urea production may fall by 5 to 8 million tons. China's natural gas imports could decline by 15-20%. Although China has diverse gas import sources and policies favoring gas supply for its urea plants, rising costs, particularly for non-planned gas, will create upward cost pressure. Overall, the possibility of China completely liberalizing urea exports is extremely low. However, with the international energy price floor now higher, and prices for urea and related commodities already significantly elevated, the substantial price gap between domestic and international urea is likely to persist. If the situation does not ease significantly, urea valuations may experience further upward pressure.
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