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Urea market grapples with EU’s CBAM as revision delayed

Urea market grapples with EU’s CBAM as revision delayed

Amsterdam, 10 December (Argus) — A considerable lack of clarity remains as to how the urea market will trade following the rollout of the EU's carbon border adjustment mechanism (CBAM) next month, with the market still waiting on confirmation from the EU regarding key aspects of the charge calculation. Market participants are split as to how the market will react to the additional carbon-related costs associated with the CBAM, and under which trade terms — whether fob, cfr, cif or fca — the most liquidity will be found. No clear consensus has emerged as to which part of the supply chain will bear the increased costs. Some expect importers to absorb most of the CBAM charge when the import market is in season, while others think that the levy will weigh on fob prices from origin markets. Some expect the cost to be spread across producers and importers. The CBAM charge depends heavily on individual plants' reported carbon emissions per tonne of urea produced, with lower fees for newer, more-efficient plants that emit less carbon and are less susceptible to unplanned outages. Plants' reported emissions vary widely, and this translates into a similarly wide carbon levy range. The fee could be as low as €15/t ($17/t), or up to as high as €70-80/t and beyond for some origins. Market participants are still waiting for the EU to confirm some key aspects of the CBAM charge calculation, even though it is set to be implemented in three weeks' time. The costs will be partly based on average quarterly prices of emission trading scheme (ETS) contracts, which adds another layer of complexity to risk management for importers. At current ETS prices, imports from Egypt — the top urea supplier to European markets — are expected to face an average carbon levy of around €40/t. But this average comes from a wide range, given that Egypt's multiple urea plants have varying rates of carbon efficiency. Product from central Asia — another key supply region — will face higher charges than Egyptian supplies. Urea production plants in Turkmenistan and Uzbekistan are older and less-energy efficient than plants in Egypt, according to trading firm Alkagesta's head of fertilizers, Vusal Muradov. Product from some central Asian plants will likely average a considerably higher CBAM cost at current rates, and European buyers will increasingly prioritise lower-emissions supply chains, Muradov said. The latest delay to the mechanism's planned revisions has not helped matters. The European Commission on Tuesday confirmed a delay to legislative proposals to revise the CBAM, which had originally been scheduled for 10 December. Officials have yet to confirm 16 December as the new date for the proposals to be presented. One major European importer speculated, likely out of hope, that the bloc may water down the CBAM charges on urea. The impending rollout of the CBAM prompted a surge in urea prices into Europe at the end of October and early November, with granular urea trading at above $500/t fob Egypt as importers scrambled to clear product through customs for their warehouses before CBAM charges are applied. The spike in north African prices saw importers look to atypical origins, with over 300,000t of urea from Nigeria, Oman, Malaysia, Qatar and China set to arrive in Romania, the UK and Turkey in November-December so far. By Harry Minihan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.