5.3.4. Product Price Volatility

Prices for urea product are influenced by a large degree by cost for feedstock ammonia and natural gas. Nexant¹¹³ summarizes the key drivers for urea prices to be¹¹⁴

• Production Costs (driver: price for energy/ natural gas)
• Consumption patterns (demand) such as the seasonality of demand (influenced by weather and climate change) and consumption patterns for changing crop mix
• Government agendas to drive bio fuels
• Industrial demand mostly for Emission control (environmental)
• Non-Fundamental factors such as financial anti-dumping Duties (US and EU), Minimum/Maximum Import Pricing (India), Export Taxes (China), Speculation from Financial community

These factors have lead to large volatility in the past and can be expected to continue assuming that most of the driving factors are subject to increasing volatility also.

¹¹³ Nexant offers technical, analytical, financial, operational, and business and strategic advisory services to all key energy resource and related industry sectors. Nexant and its affiliate ChemSystems are among the world leaders in supplying business analysis studies
¹¹⁴ Nexant, Andrew Prince, GPCA Fertilizer Conference, 2011