Fertiliser giant Yara has said the current increase in nitrogen prices may be short lived, as increasing capacity levels come on stream later in 2017.

The recent increase in nitrogen prices, which have risen more than €60/t in the last six months, has been blamed on reduced supply in the world market due to lower production coming out of China, the world’s largest urea exporter.

A near 20% increase in the cost of coal, the major raw material for fertiliser production in China, and rising logistics costs has seen the country’s fertiliser production slow sharply in the last number of months.

Yara say Chinese urea production declined almost a quarter (23%) in October and November, while production in the first month of 2017 is down 6%.

This decline in production means China, which is the world’s largest urea exporter, will have less urea available for export in 2017. In 2016, Chinese urea exports declined more than a third (36%) to 8.9m tonnes. This decline in exports is set to continue in 2017, with Chinese urea exports forecast to decline a further 15% to 40% to a range between 7.5m and 5m tonnes.

Added to this decline in Chinese urea shipments, Yara say its raw material costs have increased in recent months, which has added to price increases.

In total, about 8m tonnes in extra production capacity for urea is to be added across the world in 2017 and this could weigh on prices, according to Yara.