Summary
Companies
Sulphuric acid prices surged 500% in 2.5 years, boosting smelters' profits
Smelters now dependent on sulphuric acid market forecast to decline, analysts warn
Demand for sulphuric acid grows in battery and mining sectors, tightening market
SHANGHAI/BEIJING Feb 12 (Reuters) – When Ukrainian drone strikes hit Russia's Astrakhan gas processing plant last September, copper smelters in China were handed a windfall.
Astrakhan was a major producer of sulphur, which is processed into sulphuric acid used in mining and fertiliser and increasingly in battery supply chains.
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Acid prices were already up 41% in the nine months before the attack but when Russia halted sulphur exports, they nearly doubled again by year-end.
The surge is rewriting the economics of copper smelting in China. As earnings from their core business decline, smelters are leaning heavily on sulphuric acid as a major profit driver.
Analysts warn that leaves them exposed to a volatile market unrelated to their main business where prices are forecast to retreat even as traditional processing fees continue to decline.
Up about 500% over roughly two and a half years, the jump in sulphuric acid prices delivered an estimated $1.5 billion boost to China's copper smelters last year as traditional smelting fees collapsed.
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At Yunnan Copper, one of the country's largest smelters, sulphuric acid sales generated 790 million yuan ($114 million), about a quarter of gross profit, even though acid contributed roughly 1% of revenue, according to its half-year results published in August.
"Acid is supposed to be a byproduct, not the main profit centre. That creates risk," said Peter Harrison, an analyst at CRU.
Chart shows huge increase in prices of sulphuric acid in China since 2023
Chart shows huge increase in prices of sulphuric acid in China since 2023
NEW MONEY, OLD MONEY
Smelters typically make money by turning copper concentrate into metal for fees known as treatment and refining charges (TC/RCs). A wave of new smelters — particularly in top producer China — has intensified bidding for concentrate made scarce by mine closures and disruptions.
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Benchmark TC/RCs fell below zero in December 2024 and hit a record low of minus $49 in January.
Sulphuric acid prices, by contrast, have moved in the opposite direction. They hit about 1,045 yuan ($145) per metric ton in early January versus 464 yuan a year earlier, according to National Bureau of Statistics data.
Tight global sulphur supply from disruptions, including the Ukrainian strikes and uneven smelter output, has constrained availability of a feedstock used to make sulphuric acid, analysts say.
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In September, Zambia banned acid exports to preserve supplies for its mining industry.
With around 40% of China’s sulphur reliant on imports, higher global prices quickly fed through into the domestic acid market.
Demand is also broadening beyond fertiliser. Consumption linked to Indonesia's nickel mining sector has grown to just under a tenth of total sulphur demand, and China's lithium iron phosphate battery segment has posted similar growth in sulphuric acid demand, according to CRU.
While still small compared with fertiliser and other industrial uses, those fast-growing segments have tightened a market that for years saw limited new demand, Harrison said.
As a result, sulphuric acid now accounts for more than 64% of smelters' revenue from byproducts and other non-TC/RC sources, up from a historical 27%, according to CRU's Craig Lang.
GROWING RELIANCE
Even as it announced bumper profits from sulphuric acid, Yunnan Copper warned investors about volatility. Its peer Daye Nonferrous (0661.HK), opens new tab said around the same time that the outlook for prices was uncertain.
Concern that the market could quickly reverse partly explains why smelters resisted negative TC/RCs during last year's contract negotiations, said Anna Xu, an analyst at Wood Mackenzie.
"In theory, with sulphuric acid prices above 1,000 yuan per tonne, smelters should be able to accept negative TC on long-term contracts," she said.
"But smelters still insist on zero or above because sulphuric acid prices are uncertain and precious metals prices are also uncertain."
Chilean miner Antofagasta <ANTO,L> agreed TC/RCs of $0 in negotiations with some Chinese smelters in December.
Analysts expect prices to fall in the coming months, with Harrison forecasting a 10–30% decline.
They point to demand destruction from higher prices, new projects starting as well as Beijing's decision in November to cap exports and keep more acid at home for the fertiliser industry.
Any material drop in prices, coupled with negative TC/RCs creates a logic that points to capacity cuts, Lang said.
"If acid prices decline significantly it could increase the likelihood of smelters cutting production through measures like extended maintenance or lower utilisation."
($1 = 6.9113 Chinese yuan renminbi)
Good Morning
Iranian producers announced $428/mt as official price this week which $5/mt below than last week.
Production Rate
Pardis : 100%
Shiraz: 100%
MIS : 100%
Lordegan: 100%
Kermanshah: 100%
Khorasan: 100%
Razi: 50%
Hengam:Shutdown(Technical Problem)
Within $10 of the L1s gets the following: To achieve the tonnage it wants, RCF will have to hope traders with offers more than $10/mt over the Indagro prices will accept their counterbid. About 691,000 mt was offered up to $518/mt CFR. Once the 60,000 mt from Indagro is included, RCF can meet its 700,000 mt goal for that part of the country. However, for the East Coast, tonnage available under $522/mt CFR, including the 45,000 mt from Indagro, comes to only 480,000 mt. This would leave RCF about 300,000 mt shy of its 1.5 million mt goal.
CF Industries writes off $76m due to failed green hydrogen project and separate ammonia-related leak | Hydrogen Insight https://share.google/os523a0R3vcSRkADm
Participation in Anglo American’s Woodsmith Fertiliser Resource Project in the UK
Mitsubishi Corporation (“MC”) is pleased to announce that it has entered into a definitive agreement with Anglo American plc group (“AA”) to invest into the Woodsmith fertiliser resource project in the United Kingdom (the “Project”) and will collaborate with AA as it develops the feasibility study for the Project.
MC and AA have an established partnership across multiple projects, most recently at the Quellaveco copper mine in Peru.
Hosting one of the world’s largest polyhalite resources, the Project has the potential to support stable, long-term operations for more than 60 years. Polyhalite is a natural mineral fertiliser product containing low-chloride potassium, sulphur, magnesium, and calcium, four of the six essential nutrients plants need for healthy growth. Agronomic trials conducted globally over the past decade have demonstrated superior crop performance including yield improvement and soil enhancement.
Polyhalite also offers differentiated value compared with conventional fertilisers, including low chloride content, comparatively lower greenhouse gas emissions from the production process, and organic certification in many countries around the globe. Additionally, the polyhalite ore body in the Project is naturally high grade and does not require beneficiation, resulting in reduced water consumption during operations, and eliminating the generation of mining waste—an important feature that contributes to the Project’s low environmental footprint.
Through the feasibility study, MC will leverage its extensive networks across the food and agriculture sectors, including providing opportunities for agronomic trials through its group companies, and the expertise it has built in mine development and operations through its Mineral Resources Group. MC will bring together its integrated strengths across business segments—including the food and agriculture related businesses—to generate new value through the Project.
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#MitsubishiCorporation #MC #AngloAmerican
LONDON (ICIS)–In India, Indagro has offered the lowest in RCF’s urea import tender at $508/tonne CFR for west coast and $512/tonne CFR for the east coast. Prices are in line with expectations.
Morning. Market participants remain sidelined as expectations for today of an official RCF tender price announcement. Nola urea activity was also subdued with FH March Nola phys changed hands at $458 and Feb at $463.
AG
Feb $480//$490
Mar $470//$485
Apr $448//$465
May $440/$458
cfr Brazil
Feb $470//$480
Mar $465//$480
Apr $450//$465
May $440//$458
Q3 $450 Seller(s)
Egypt
Feb $495//$510
Mar $480//$495
Apr $470//$495
Nola
Phys: Fh mar traded $458. Feb $463
Paper:
Feb $456/$465
Mar $448//$455
Apr $436//$450
May $400//$420
Jun $385//$410
Brazil Amsul
Feb $200//$220
Mar $205//$225
UAN Nola
Mar $340//$360
Apr $340//$360
DAP Nola
Feb $625//$640
Mar $620//$635
MAP Brazil
Feb $710//$735
Mar $715/$730
Apr $715//$735
Jun/Jul $750 Offer
AG weekly index = $487, Feb Avg =$484.83
Cfr Brazil weekly index = $477.5, Feb Avg = $474.33
Egypt weekly index = $497.50, Feb Avg = $498.66
Brazil Amsul weekly index = $217.50, Feb Avg = $213.33
𝗣𝗿𝗲𝗹𝗶𝗺𝗶𝗻𝗮𝗿𝘆 𝗘𝗨𝟮𝟳 𝗶𝗺𝗽𝗼𝗿𝘁 𝗱𝗮𝘁𝗮 𝗳𝗼𝗿 𝗝𝗮𝗻𝘂𝗮𝗿𝘆 𝟮𝟬𝟮𝟲 𝗶𝘀 𝗻𝗼𝘄 𝗮𝘃𝗮𝗶𝗹𝗮𝗯𝗹𝗲. 𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝘄𝗲 𝘀𝗲𝗲𝗶𝗻𝗴?
The most obvious takeaway is a sharp decrease in total nitrogen (N) imports.
Total N imports in January 2026 were down ~66% compared with January 2025, marking a substantial deviation from “normal” years… though what is “normal” these days?
𝗔𝗺𝗺𝗼𝗻𝗶𝗮: 𝘁𝗼𝘁𝗮𝗹 𝘃𝗼𝗹𝘂𝗺𝗲𝘀 𝗯𝗿𝗼𝗮𝗱𝗹𝘆 𝗰𝗼𝗻𝘀𝗶𝘀𝘁𝗲𝗻𝘁… 𝗕𝗨𝗧
• In January 2026, around 108 kt N of ammonia was imported from Russia, the highest January level in the years shown.
• We know that ammonia is exempt from the additional import tariffs on fertilizers originating from Russia (and Belarus), unlike most downstream products.
• Fertecon’s vessel tracker data indicates Russian ammonia (notably produced by EuroChem) has been primarily shipped to Belgium, where EuroChem operates downstream fertilizer production units.
• The volume of ammonia imported is certainly conducive to production capacity of N downstream output, suggestive that this trade flow is essentially an in‑house transfer of material rather than merchant market supply.
𝗚𝗹𝗼𝗯𝗮𝗹 𝗽𝗿𝗲𝘀𝘀𝘂𝗿𝗲𝘀 𝗳𝗿𝗼𝗺 𝗖𝗕𝗔𝗠 𝘂𝗻𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆?
• Imports of ammonia from other suppliers like Trinidad & Tobago and the United States have decreased, likely pointing to uncertainty around CBAM.
• CBAM‑accredited emission verifiers are thought to be limited outside Europe, meaning there is reliance on CBAM default emission values.
• These default values can imply significantly higher carbon costs than verified plant‑specific emissions (for example, the US default value of 3.44 t CO₂/t ammonia).
𝗙𝗲𝗿𝘁𝗶𝗹𝗶𝘇𝗲𝗿𝘀: 𝗳𝗿𝗼𝗻𝘁 𝗹𝗼𝗮𝗱𝗶𝗻𝗴 𝗮𝗵𝗲𝗮𝗱 𝗼𝗳 𝗖𝗕𝗔𝗠
• Imports of N from fertilizers, particularly of urea, nitrates, and AS increased in the months leading up to CBAM’s definitive phase.
• Urea imports in 2025 were the highest across 2021–2024, reaching almost 3.4 Mt N. Egyptian supply was especially significant at nearly 1.50 Mt N; Russian urea imports also remained material at ~875 kt N.
• While the EU’s additional tariffs on Russian fertilizer imports clearly reduced flows from July onwards, more than 230 kt N was still imported from Russia in the remainder of the year, indicating that Russian supply has not yet been fully priced out of the EU market.
• Ammonium sulphate imports rose to around 322 kt N, with virtually all volumes sourced from mainland China.
𝗢𝘃𝗲𝗿𝗮𝗹𝗹, these early signals point to a nitrogen market in flux, shaped by policy, carbon costs, and strategic trade flows.
We would like to note that preliminary data is not always complete, and some countries may suppress posting their trade data.
Nevertheless, an interesting space to watch! Happy to chat if you’d like to explore the implications in more detail
ICE canola futures rose on Thursday but fell further behind surging soyoil.
Most-traded May rose $1.90 to $684.60 per metric ton. March rose $2.40 to $672.60. November rose $1.70 to $688.80.
Without an independent bullish dynamic to take canola futures higher, they will continue to lag soyoil, a trader said.
Chicago soyoil rose sharply this week, despite trade and government estimates showing U.S. farmers favoring soybeans over corn in their planting intentions, boosting soybeans by 4 million acres.
U.S. farmers plan to grow 94 million acres of corn, which is at the low end of trade expectations.
Nutrien expects North American potash sales to rise in 2026 despite poor farmer profitability and signs that they are only reluctant buyers of phosphate.
Chicago soyoil rose 1.71%, while soybeans rose 0.71%.
Euronext rapeseed futures rose 1.08%.
Malaysian palm futures rose 2.51% following the Lunar New Year holiday.
The Canadian dollar was little moved despite crude oil rising above $66.50 per barrel.
Oil prices rose around 2% on Thursday to settle at their highest level in six months, as traders worried about escalating tensions between the United States and Iran, which have stepped up military activity in the oil-producing Middle East.
Brent crude futures settled up $1.31, or 1.9% at $71.66 a barrel, while U.S. West Texas Intermediate crude settled up $1.24, or 1.9% at $66.43.
After advancing more than 4% on Wednesday, Brent closed at its highest since July 31, while WTI closed at its highest since August 1.
Oil prices got a boost from "geopolitical tensions and the worry that the U.S. is going to strike (Iran) in the near future," said Andrew Lipow, president of consultancy Lipow Oil Associates. "The market will continue to rally in anticipation of something happening."
Iran planned a joint naval exercise with Russia, Iran's semi-official Fars news agency reported, days after it shut down the Strait of Hormuz for a few hours for military drills. The Strait is a vital link for trade, with about 20% of global oil supply passing through it.
TRUMP WARNS IRAN
U.S. President Donald Trump warned Iran on Thursday that it must reach a deal over its nuclear program or "bad things" will happen, and appeared to set a 10-day deadline before the U.S. might take action.
The U.S. has deployed aircraft carriers, warships and jets to the region, with U.S. Vice President JD Vance saying Washington was considering whether it should continue diplomatic engagement with Tehran or pursue another option.
Iran issued a notice to airmen that it planned rocket launches in areas across the south of the country on Thursday, according to the U.S. Federal Aviation Administration website.
Some countries have asked their residents to leave Iran.
Separately, crude oil exports from Saudi Arabia, the world's largest oil exporter, fell to 6.988 million barrels per day, their lowest level since September, data from the Joint Organizations Data Initiative showed on Thursday. Earlier this month, Reuters reported that producer group OPEC and its allies were leaning toward a resumption of oil output increases from April.
Two days of peace talks in Geneva between Ukraine and Russia ended on Wednesday without a breakthrough, as Ukrainian President Volodymyr Zelenskiy accused Moscow of stalling U.S.-mediated efforts to end the four-year-old war.
U.S. crude stocks dropped by 9 million barrels, as refining utilization and exports climbed. That was contrary to expectations in a Reuters poll that crude stocks would rise by 2.1 million barrels in the week ending February 13. Gasoline and distillate inventories also fell last week, thanks to higher consumer demand.
"We had a build last week because of weather storms and so we are seeing a drawdown," said Phil Flynn, senior analyst with Price Futures Group.
"We have a solid market with solid demand and that should give (prices) support until the end of the day."
PRICE DISCOVERY OF THE INDIA UREA EXPECTED WITHIN FRIDAY FEBRUARY 20TH – THE UREA MARKET FUNDAMENTALS ARE STRONG WITH CHINA STILL ABSENT FROM THE INTERNATIONAL SCENE
-PROCESSED PHOSPHATE PRICES ARE HOLDING FIRM DESPITE LACK OF ACTIVITY AND PRICES ARE EXPECTED TO INCREASE OVER THE NEXT FEW MONTHS DUE TO LACK OF AVAILABILITY WITH CHINA ABSENT
-POTASH PRICES ARE EXPECTED TO INCREASE OVER THE NEXT FEW MONTHS AS LOW INVENTORIES IN BRAZIL WILL SUPPORT IMPORTS
-AMMONIA PRICES ARE EXPECTED TO DECREASE OVER THE NEXT COUPLE OF MONTHS DUE TO INCREASED SUPPLY FROM THE US GULF
UREA
RCF of India received a total of 3.073 million MT of urea offers in its latest tender. The net offers excluding double counting, is probably closer to around 1 million MT. Price discovery is expected over the next 24 hours, but strong indications are that the range will be between USD 505 PMT CFR and USD 510 PMT CFR. There is also expectation that the chunk of the offers will be around the USD 520 PMT CFR with Russian products leading the way.
If above metrics come true, the urea market appears strong with netbacks to the Middle East around the middle of USD 490s PMT FOB and SE Asia at around the middle of USD 480 PMT FOB. China is still staying away from international trade limiting supply for the India tender. Pupuk Indonesia is expected to come with a sales tender imminently having only sold one cargo to date in 2026 from an export allowance of 1.4 million MT. Both Petronas and BFI are rumoured to be sold out for March.
Iranian producers are slowly coming back into the market accessing gas otherwise allocated to residential homes. Iran’s urea capacity is now 8.6 million MT and growing. Current official export price is set at USD 435 PMT FOB. However, exports of urea and ammonia from Iran could be in jeopardy if the US starts dropping bombs on Iran as is widely speculated in the media. If that happens and the Hormuz Strait closes or traffic will be materially affected, more than 20% of global deep sea urea exports will be affected. Only imagination will put a limit on what will happen to the urea price. This could also put the current India tender under stress.
Middle East urea producers are under no stress at this time having concluded shipments to the previous India tender and now waiting for the outcome on the current tender. Egyptian producers have been inactive following the latest sales to Europe at USD 506 PMT FOB.
In other news of note, Dangote of Nigeria is said to have agreed exports of 3×30 KT granular urea to Ethiopia for March shipment with prices undisclosed currently. Freight via The Cape is said to be touching USD 70 PMT.
Other issues affecting business this time of year are the Chinese New Year celebrations with the Year of the Horse starting from February 17th. On the 19th of February and one month ahead, Ramadan kicks in which also tends to slow business activity.
In summary, the urea market appears strong and will remain so for the foreseeable future. In addition, geopolitical issues with the US threatening military action against Iran could certainly lead to immense stress on global supplies of urea. The India tender will also be affected. The value of the USD, which has depreciated over the past 12 months, will be weakened further in the event of war – gold and crypto will again come good!
PHOSPHATES
Global DAP and MAP price benchmarks were mostly stable this week amid limited activity, though some key FOB assessments climbed higher, and overall sentiment remained bullish as an exceptionally tight supply outlook and high raw materials prices continue to offset seasonally slow demand and affordability concerns. Prices in the key MAP import market Brazil were assessed steady at $725-730/t CFR following six consecutive weeks of increases and are up 15% year to date at their highest level since early September 2025. The MAP assessment is still slightly below its 2025 peak of $760/t CFR during the first three weeks of July, which represented the highest level since September 2022, though it has climbed rapidly from $630/t CFR at the end of 2025. Buyer appetite remains restrained amid affordability concerns. Poor affordability relative to downstream agricultural commodities, as well as financial issues and limited access to credit, are likely to continue restraining demand in the coming weeks, particularly as it is the offseason for phosphates demand. Higher prices for potash compared with last year are increasing affordability challenges. Prices in the key DAP market India were also unchanged at $680-684/t CFR amid limited activity and reduced buyer interest during the off-season.
Given severe export restrictions in China, granular phosphates prices are forecast to climb even higher this year than in 2025, with no respite likely for buyers until Q3 at least.
POTASH
MOP markets across key regions remained broadly stable in mid-February, with trading activity subdued in several markets due to seasonal slowdowns and a lack of fresh spot transactions. While prices have largely held within established ranges, underlying sentiment in most regions remains firm, supported by balanced supply-demand fundamentals and limited near-term downside expectations. In Brazil, MOP prices were assessed at $365–380/t CFR, unchanged week on week. Dealmaking slowed amid carnival-related disruptions and Lunar New Year. Around 25% of expected demand for the 2026/27 soybean season has reportedly been covered, leaving significant purchasing still to come. Farmers continue to cite elevated price levels as a constraint, with buying interest heard closer to $360/t CFR equivalent. Suppliers, however, indicate tighter availability, with some withholding March volumes. As potash remains the most affordable nutrient, it has spurred increased attention from both buyers and sellers.
Across Southeast Asia, potash prices were stable, with standard MOP assessed at $360– 390/t CFR and granular at $390–410/t CFR. Activity was muted ahead of Lunar New Year holidays, though small tenders were heard in Malaysia and demand for subsidised fertilizers in Indonesia has begun to increase ahead of the main planting season. Palm oil fundamentals remain supportive, with CPO futures holding above MYR 4,000/t despite recent softening. Stronger agricultural margins could underpin fertilizer demand later in the season.
MOP prices in most regions are forecast to rise in the coming quarter as potash remains the most affordable nutrient, and suppliers are in a bullish mood.
AMMONIA
Ammonia prices held steady west of Suez, supported in part by supply constraints and firming freight rates, though markets in the East are turning bearish as key import hub India prepares for a seasonal lull.
In the Middle East, no new spot business was cited. The market is generally considered long, with Ma’aden and Sabic sending term cargoes to India, South Korea, and Morocco for clients including OCP. Vessels are also scheduled to load from Qatar Energy for Trammo and Mitsui, and from OQ for a trader. In Iran, Hengam Petrochemical Company closed a sales tender for 10,000 t for shipment to either India or Turkey, with an award awaited. In the Far East, market activity was muted. Contract values in Taiwan, China held steady at around $470-490/t CFR. In South Korea, Ma'aden delivered term material to Lotte and has another cargo en route for Namhae. Trammo also delivered Chinese contract tonnes to Lotte. Elsewhere, a Mitsubishi vessel delivered Indonesian volumes to clients in China and is now approaching Taiwan, China with at least 10,000 t for TFC.
The market will begin to turn even more bearish as renewed supply from the US Gulf draws closer.
Morning. As official price discovery into RCF tender awaited, stand off on Int'l paper largely remained, but Mar Brazil found value in low-$470s cfr. On Nola urea, Mar barges traded into upper $450s, after Mar paper traded $452 (+$4 from day prior).
AG
Feb $480//$490
Mar $465//$480
Apr $448//$463
May $440/$458
cfr Brazil
Feb $470//$480
Mar $465//$477 – traded $471.50
Apr $450//$465
May $440//$458
Q3 $450 Seller(s)
Egypt
Feb $495//$510
Mar $480//$495
Apr $470//$495
Nola
Phys: Mar traded $455-$457
Paper:
Feb $456/$465
Mar $448//$455 – traded $452
Apr $434//$445
May $400//$420
Jun $385//$410
Brazil Amsul
Feb $200//$220
Mar $205//$225
UAN Nola
Mar $340//$360
Apr $340//$360
DAP Nola
Feb $625//$640
Mar $620//$635
MAP Brazil
Feb $710//$735
Mar $715/$730
Apr $715//$735
Jun/Jul $750 Offer
Every time fertilizer prices rise, I hear the same argument:
“We need more US production. These companies are monopolies. Prices should be cheaper.”
I understand the frustration. Input costs matter enormously to farmers, and fertilizer is one of the biggest line items. When prices spike, it’s natural to look for someone to blame.
Sure, it would be great to produce all our own fertilizer needs but until it gets less restrictive or somehow less expensive, it’s a tough sell.
Let’s walk through the math nobody actually runs when they make this argument.
WHAT DOES NEW US PRODUCTION ACTUALLY COST?
Let’s say you’re convinced the US needs a new world-scale urea plant. You want to reduce import dependency, increase domestic supply, and push prices lower.
Great. Here are some ballpark numbers to make that happen:
Capital cost: $3-5 billion
Permitting timeline: 2-3 years (federal environmental review, state approvals, local permits)
Construction timeline: 3-4 years
Total from groundbreaking to first ton: 5-7 years roughly
Before you produce a single short ton of urea, you’ve committed close to $4 billion and waited the better part of a decade.
And that’s if everything goes smoothly, absent regulatory challenges, construction delays, and supply chain issues.
For reference, some recent real-world data points:
∙ CF Industries’ Donaldsonville ammonia expansion: $2B+ for a single unit
∙ New greenfield ammonia plants in the US: $3.5-4B range
∙ European facilities built in the last decade: equivalent of $4-5B
The question isn’t whether this is technically possible.
The question is who funds it, and at what return?
THE ECONOMICS PER SHORT TON:
Now let’s run the numbers at current market conditions.
NOLA urea spot price: ~$460/ST
Production cost (nat gas, labor, maintenance, overhead): ~$180-230/ST (on the low end)
Operating margin: ~$230-280/ST ~ roughly 20-30% (can be higher, can be much lower.)
On a 1M MT/year plant (approximately 1.1M Short Tons/year):
Annual gross profit: 1.1M ST × $250/ST = ~$275M/year
Against a $4B capital investment:
Simple payback: 14-15 years before financing costs.
Now add realistic financing. Most large capital projects use a 60/40 debt-to-equity structure:
∙ Debt: $2.4B at 7% interest = $168M/year in interest payments
∙ Net annual profit after debt service: ~$107M
∙ Equity payback: 15+ years
Risk-adjusted return: 6-10% over a 20-year asset life.
This is the investment case for new US nitrogen production.
WHY 6-10% IS A TERRIBLE RETURN FOR THIS RISK
Let’s put that 6-10% return in context.
At the same time you’re deciding whether to build a $4B fertilizer plant, here’s what else you could do with that capital:
∙ 10-year US Treasury: 4.5% with zero risk, zero cyclicality, liquid
∙ S&P 500: ~10% on average – diversified, liquid, no single-asset risk
∙ Tech sector: 20-30% returns with less capital and faster payback
∙ Private equity: 15-20% IRR target with more control and better terms
A fertilizer plant offers 6-10% returns with:
∙ Massive single-asset concentration risk
∙ Exposure to nat gas price volatility (your biggest input cost)
∙ Commodity price cycles you cannot control
∙ 20+ year time horizon
∙ Illiquidity – you simply can’t just sell a plant like you can a stock
Show me the hedge fund or private equity group writing a $4B check for those terms.
The Cycle Nobody Mentions:
Here’s what gets conveniently left out of the “excessive profits” argument: the cycle.
Urea prices over the past five years:
∙ 2020: ~$220-230/ST – barely covering production costs for many producers
∙ 2021: ~$330-365/ST – recovering
∙ 2022: ~$700-800/ST – exceptional, driven by European energy crisis
∙ 2023: ~$350-400/ST – normalizing
∙ 2024-2025: ~$400-460/ST – current levels
Everyone remembers 2022. Nobody mentions 2020.
In 2020, with urea at $220/ST and production costs at $180-200/ST, US producers were operating at near-breakeven or worse. No windfall profits. No headlines. Just survival.
That’s how cyclical commodities work. You bank margins in good years to survive bad ones, service debt, fund maintenance capex, and, if you’re optimistic, justify future investment.
The “monopoly profits” critics point to are the same margins that barely justify continued operation in down cycles.
THE THREE OPTIONS NOBODY WANTS TO CHOOSE:
When someone says “we need more production and lower prices,” they’re basically proposing one of three things. Let’s look at each honestly.
Option A: More private capital investment
This requires accepting that producers earn market returns, the same 20-30% operating margins critics call “excessive.” Without those margins, the investment case doesn’t work.
Option B: Government ownership
If private capital won’t invest at acceptable returns, the government could build and operate facilities. This is not theoretical; it has been tried in other countries.
Venezuela nationalized its fertilizer industry. Production collapsed 80%+. Today they import fertilizer despite having the resources to produce it. The Soviet Union’s state-run agricultural inputs system was a chronic under performer requiring constant subsidies. State-run industries without profit incentives chronically underinvest in maintenance, efficiency, and capacity.
Option C: Non-profit or cooperative model
A farmer-owned cooperative could theoretically build production capacity. But who funds it? Raise your hand if your farm cooperative has $4B available for a urea plant with a 15+ year payback.
I’ll wait.
WHAT ACTUALLY MOVES THE NEEDLE
I’m not just writing this to defend fertilizer companies. I’m writing this because the wrong diagnosis leads to the wrong solutions, and bad policy here has real consequences for US food production.
If we genuinely want more domestic fertilizer production and more price stability, here’s what needs to happen:
Permitting reform: The 2-3 year permitting timeline adds enormous carrying costs to any new project. Streamlining this doesn’t mean ignoring environmental concerns, it means running these processes in parallel instead of sequentially. Create Exemptions for Agriculture/Food Security/Essential Industries, whatever you want to call it.
Long-term natural gas access: Nitrogen production economics live and die with nat gas. Producers who can lock in long-term supply contracts at reasonable prices can build plants with better economics. Policy that supports domestic gas production and pipeline infrastructure directly supports fertilizer investment.
Accepting cyclicality: Proposing price caps or “windfall profit taxes” on fertilizer producers destroys the incentives for new investment. You can’t have “build more capacity” and “cap your upside” simultaneously. Capital goes where it’s treated best.
CLOSING:
The fertilizer industry is certainly not perfect. No industry is. There are also legitimate conversations that should be had about market structure, pricing transparency, and supply chain resilience. However, just saying “they’re monopolies making excessive profits,” isn’t a productive conversation. Not when the math shows that producers earn fairly mediocre risk-adjusted returns on these proposed multi-billion dollar investments.
The next time someone tells you we just need to “build more plants,” ask them one question:
Who’s writing the $4 billion check, and what return are they expecting?
If they can answer that clearly, or if they have solutions to make the process friendlier to Ag investors, we have something to talk about. Until then, we’re just yelling at market economics and wondering why nothing changes.
France imported more than 1.15mn t of urea in July-December, up from 842,000t a year earlier as buyers accelerated purchasing ahead of the EU's carbon border adjustment mechanism (CBAM) taking effect on 1 January.
France received 279,000t of urea in December, compared with an average of around 137,000t during the month over past three years.
The increase in imports in late 2025 has eased the pressure on buyers for the spring, although importers will still need to buy around 560,000t of urea in January-June to align with average intake over the past two seasons (July-June). France imported around 1.57mn t in the 2024-25 season, 1.68mn t in 2023-24 and 1.86mn t in 2022-23.
Only three vessels — the Sandera, Grona Vulture and Kwai Kwai — with a combined 64,400t of Egyptian and Algerian urea were confirmed for arrival over 1 January-23 February, according to data from trade analytics platform Kpler. The slowdown in arrivals was widely anticipated after strong deliveries in the fourth quarter, and imports have been further compounded by farmer protests, uncertainty surrounding CBAM costs, and adverse weather that delayed fieldwork.
France imported roughly 1.9mn t of urea in the 2025 calendar year, up by 12pc on the year and about 7pc above the 2022-24 average.
CBAM set to reshape trade flows
Urea imports are subject to a carbon-intensity-based levy since the imposition of the CBAM. The regulation is expected to influence trade flows into France and enhance the attractiveness of buying urea from European producers. But the extent to which this trend will develop is unclear at this stage.
Egypt and Algeria were France's largest suppliers of urea last year, accounting for 33pc and 25pc of arrivals, respectively, at 622,000t and 474,000t. France imported 146,000t from Belgium, but part of this was likely product re-exported through Ghent. Nigerian shipments to France were minimal at 48,000t.
Default CBAM charges were assessed at around €36/t ($43/t) for Egyptian urea and €37/t for Algerian product on 16 February, based on Argus EU emissions trading system (ETS) prompt indications. Final CBAM liabilities will be calculated from quarterly average EU ETS auction prices in 2026. Importers also have the option to use emissions data specific to verified plants, in a bid to incur a lesser charge than the country default.
Russian supplies dropped sharply to 43,000t in 2025 from 162,000t a year earlier, and this trend is expected to persist. EU tariffs on Russian fertilizers will step up again in July, raising duties on nitrogen products under tariff code 3102 to €60/t — in addition to the 6.5pc standard tariff and any applicable anti-dumping duties. Many 3105-coded products will attract a €70/t charge from July. Current July 2025–June 2026 tariff rates are at €40/t and €45/t, respectively.
Inflows of urea from European origins remained significant last year, with 272,000t arriving from the Netherlands and 164,000t from Germany. Combined deliveries from Spain and Italy were limited to 62,000t.
Western Europe's urea capacity stands at roughly 5.5mn t/yr, but production has been constrained in recent years by elevated feedstock and gas costs.
LONDON (ICIS)– In India, Rashtriya Chemicals and Fertilisers’ (RCF) received 20 offers totalling nearly 3.1 million tonnes in its 18 February import tender of urea, for shipment by 31 March.
Prices should open tomorrow or Friday.
In the previous 2 January tender, NFL received 26 offers for a total of 3.62 million tonnes of urea and ended up awarding 971,750 tonnes below its target of 1.5 million tonnes.