China asks fertilizer producers to suspend urea shipments

China has asked some fertilizer producers to suspend urea exports after domestic prices jumped, a move that’s likely to restrict supplies and boost costs for farmers in key buyers such as India.

Some major Chinese fertilizer makers halted signing new export deals from early this month following a government mandate, according to people familiar with the matter, who asked not to be identified as they’re not authorized to speak to the media. The restriction only applies to urea so far, they said.

Urea futures on the Zhengzhou Commodity Exchange surged almost 50% over a seven-week period from mid-June to the end of July, but have fluctuated since. Prices slid almost 6% on Thursday, snapping two days of gains.

Low Chinese inventories and higher exports had combined to push urea prices higher, said Chen Li, an analyst with Huatai Futures in Guangdong. “Fertilizer use in crops like soybeans and corn in the first half of the year should have risen due to more top-dressing demand after extreme weather,” she said. 

China is the world’s top producer and consumer of urea and any significant decline in exports threatens to tighten supplies and push up global prices. Among the biggest export markets for the nation’s crop nutrient are India, South Korea, Myanmar and Australia.

Shares of China’s urea producers ended the session lower following the report. State-owned China BlueChemical Ltd. fell 1.5% while Sinofert Holdings Ltd. lost 1% in Hong Kong. On the Shanghai exchange, Cangzhou Dahua Co. fell most in almost two weeks while Shandong Hualu Hengsheng Chemical Co. slid 1.4%. 

China’s Ministry of Commerce and National Development and Reform Commission did not immediately respond to faxes seeking comment.

At least one producer has already publicly announced plans to reduce fertilizer exports. CNAMPGC Holding Co. said over the weekend that the company will curb shipments to secure supplies and maintain prices at stable levels.

The restrictions add another element of volatility to the global agriculture market, which has been affected by extreme weather across growing regions, export curbs by India and Russia’s war in Ukraine.