Urea imports in Brazil: The increasing demand pressure from the biofuels industry and the role of domestic natural gas for the country's urea production growth

Brazil is a major producer of liquid biofuels. To achieve these production levels, energy crops require the use of fertilizers, and to put pressure on the nitrogen fertilizer domestic market. This contributes to an increasing level of imports and trade deficits in the chemical industry. The main raw material for the production of urea is natural gas, which is also imported. Therefore, the expansion of energy supply via biofuels occurs through an increasing trade deficit either of urea or of natural gas. This highlights the debate about the impact of the expansion of such energy crops and the priority in the use of the natural gas domestically produced. Findings show that Brazil will stay a major importer of urea. Urea consumption associated with the production of biofuels has sufficient magnitude to justify an expansion of production capacity through a greenfield facility. However, the analysis of natural gas break-even price indicates that the project is not feasible, under a private investor logic. Even under the country strategic perspective (energy security versus trade deficits), being importer of urea is less risky (in terms of volume and prices) than being importer of fuels (natural gas as feedstock, or gasoline and diesel that are replaced by biofuels).