The market was negatively impacted by COVID-19 in 2020. The urea-based selective catalytic reduction (Urea SCR) technique is used to extract enough nitrogen oxide (NOx) from diesel engine exhaust stream in vehicles. Considering the COVID-19 pandemic situation, several countries were forced to go in lockdown which led people to minimize the usage of personal vehicles, along with that automotive manufacturing plants were on a temporary halt, thus led to decline in the consumption of urea-based catalysts. According to OICA, global automotive production has witnessed a decline of approximately 23% in Q3 of 2020 compared to Q3 of 2019, which in-turn negatively impacted the demand for urea market.

- Over the short term, increasing demand for urea as fertilizer from the agriculture industry is expected to drive market growth. Urea is a valuable source of nitrogen, and due to the high content of nitrogen availability, it is mostly used in nitrogen-based fertilizers. It is also used in multi-component solid fertilizers, foliar sprays in small amounts. When in contact with soil, urea is converted to ammonium bicarbonate. Urea is mixed with the soil to protect the gas formed from ammonium.

- The health hazards regarding urea are likely to hinder the market growth.

- The discovery of applications for urea in the preparation of bio-bricks is likely to create opportunities for the market in the coming years.

- Asia-Pacific region is expected to dominate the market and is also likely to witness the highest CAGR during the forecast period.

Key Market Trends

Technical Grade is Likely to Witness the Highest Growth Rate

- Technical grade urea is used in many applications, such as glue, medical drugs, dyes, disinfectants, cosmetics, and in the production of yeast. The nitrogen content in the technical grade urea is a minimum of 46% by weight (on a dry basis).

- Urea is mostly used in the selective catalytic reduction technology, which is operated to reduce the emission levels. It is mixed with deionized water, at a concentration of 32.5%, to form AdBlue.

- AdBlue is a reagent used for the SCR technology, which is fed into the exhaust, and reacts with the nitrogen oxide gas produced by the combustion process, breaking it down into harmless nitrogen and oxygen.

- With emission regulations by the governments on air pollution, automobile industries are concentrating on the reduction of emissions from the exhaust. This is, thereby, increasing the need to use reagents, such as AdBlue.

- After a prolonged tenure of growth during the past decade, the momentum of the automotive sector has slowed down in recent years. Sales of new vehicles are going down in various parts of the world, including Europe and the United States, as business models and markets are changing, and so is the competitive landscape.

- The automotive industry has seen slowdown from couple of years. According to the International Organization of Motor Vehicle Manufacturers (OICA), the sales of the automobiles has declined in 2019 by around from 95.06 million units in 2018 to 91.29 million units in 2019, which in turn negatively impacted the market growth of urea.

- Further, with the growing automotive fleet across the world, the use of selective catalytic reduction (SCR) technology is projected to increase, which in turn will increase the consumption of technical grade urea in the forecast period.

- The technical grade urea is also used in urea-formaldehyde resins, adhesives, plywood, animal feed, and cloud seeding agents.

- Additionally, urea is also used as a base component in many creams and with the growing demand for cosmetics, the demand for technical grade urea is likely to increase.

- Overall, the market for technical grade urea is expected to register the highest growth rate during the forecast period.

Asia-Pacific Region to Dominate the Market

- The Asia-Pacific region accounted for the highest market share followed by North America.

- With the increase in population, developments in the agriculture industries are taking place in countries, like India and China. This results in an increase in the consumption of nitrogen fertilizers, thereby, driving the market.

- Apart from the agriculture industry, consumption is also increasing with the advancements in chemical, automobile, and medical industries.

- In 2019, the annual volume sales of chemical fertilizers were accounted for 53.83 million tons in China, registering a growth rate of 1.89% compared to the previous year, which in turn stimulated the demand for the urea market.

- China is the largest vehicle producer across the globe. As of Q3 2019, China had produced 18.17 million vehicles and reached 16.96 million vehicles by Q3 2020, registering a decline rate of about 6.66%, which in turn has led to a decrease in the consumption of urea-based autocatalysts, thus creating a negative effect on the growth of urea market in the country, in-turn affecting the regional market demand.

- China is one of the largest producers of urea-formaldehyde resin in the world. The urea-formaldehyde resins are used in the construction industry as adhesives for the bonding of plywood, particleboard, and other wood products. The Chinese construction industry was valued at about USD 968 billion in the year 2019 and is estimated to reach about USD 1,117 billion by 2021, with a CAGR of about 7%, thus increasing the demand for urea-formaldehyde resins, which in-turn is likely to stimualte the demand for the urea market.

- In the year 2019, the sales of nitrogen-based chemical fertilizers in India was 17.63 million tons, with a growth rate of 3.95% compared to the previous year, which in-turns has driven the market demand.

- As of Q3 2019, India had produced 3.5 million vehicles and reached 2.16 million vehicles by Q3 2020, registering a decline rate of about 38%, which in turn has led to a decrease in the consumption of urea-based autocatalysts, thus creating a negative effect on the growth of urea market in the country, in-turn affecting the regional market demand.

- The gross domestic product (GDP) from construction in India increased to USD 37.20 billion in the fourth quarter of 2020 from USD 30.40 billion in the third quarter of 2020, with a growth rate of about 22%, thus led to a increase in the consumption for the construction material made up of urea formaldehyde resins, which in turn stimulates the demand for the market studied.

- Due to all such factors, the market for urea in the region is expected to have a steady growth during the forecast period.

Competitive Landscape

The market for urea is partially consolidated, as the market share is divided among a few major companies. Some of the major players in the market include SABIC, BASF SE, Nutrien Ltd., Yara, and China National Petroleum Corporation, among others.

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