FocusChina tax hike sends urea prices spiralling

11 April 2008 16:34  [Source: ICIS news]

By Carl Roache

 

LONDON (ICIS news)--The news China will hike its export tax to 135% sent shockwaves throughout the global urea market and has caused prices to shoot up at an alarming rate this week, market players said on Friday.

 

It was not clear how far prices would rise but certain producers were content to wait and see before offering firm tonnes.

 

The global market was thrown into disarray this week after news emerged that China would effectively block exports from late April.

 

With Chinese imports no longer a viable option, what amounts to around 450,000 tonnes/month of urea would be in effect taken out of the world market.

 

This prompted a rush to buy product from other regions. As a result, price ideas in key markets spiralled.

 

The benchmark Yuzhny FOB (free on board) price started the week around $405/tonne (€259/tonne) FOB Yuzhny but then shot up to $450/tonne FOB and even higher.

 

“Some say $480/tonne FOB Yuzhny has been done,” said a trader.

 

A rumour of a trade at $500/tonne FOB Yuzhny was also reported.

 

Due to the upward trend on prices, there were almost no firm offers in the market.

 

“They [sellers] see the market as firm so they won’t commit,” explained another trader.

 

Certain Baltic suppliers were also no longer offering tonnes, preferring to sit back and watch prices rise.

 

In the Middle East, price ideas for urea also rose sharply The latest business out of the Arab Gulf reflected around $410-415/tonne FOB.

 

However, now price ideas are much firmer, with one producer saying new offers would be at least $450-460/tonne FOB.

 

The US urea market was brought out of its long running slump by the news out of China. Traders began buying up urea barges to re-export, which caused granular urea prices to shoot up around $40/short ton over the week to above $400/short ton FOB Nola (New Orleans), as of Thursday.

 

At the time of publication, prices had reportedly jumped up again to $430/short ton FOB Nola.

 

In Brazil, early this week product was sold at $445/tonne CFR. However, now buyers would likely face the new Yuzhny FOB level, plus around $60/tonne freight, to total at least $540-560/tonne CFR.

 

Asian markets, particularly southeast Asia and the Asia-Pacific, were likely to be hit badly by the news, as importers had come to rely on Chinese urea.

 

Global urea prices were likely to rise further as those with tonnes found themselves in a commanding position.

 

With India looking to buy substantial quantities very soon, the price level they pay would play a key role in setting future prices. However, as they were estimated to require nearly 2m tonnes, they had limited room to manoeuvre, traders said.

 

($1 = €0.64)

 

By: Carl Roache
+44 20 8652 3214

< previous article(VIDEO - ICIS news Asia Lunchtime Bulletin 3 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly