FocusLarge-scale India buying looms over urea

30 May 2008 15:06 [Source: ICIS news]

By Carl Roache

LONDON (ICIS news)--Global granular urea prices have firmed, while prilled numbers have stabilised ahead of large-scale Indian buying, traders said on Friday.

India’s State Trading Company (STC) is set to enter the market next week to buy up to 650,000 tonnes of urea on a formula basis. With Indian Potash Limited (IPL) likely to follow soon after with a further 650,000 tonne tender, this massive requirement looms large over the global urea markets, particularly in the absence of Chinese exports.

Despite this, prilled urea prices have stalled due to the continued absence of India in the market. An Indian tender has been expected for several weeks and its continued non-appearance has halted the climb of prilled prices.

Following weeks of successive rises, the key benchmark Black Sea prilled urea price remains largely unchanged from last week, pegged at around $650/tonne (€423/tonne) FOB (free on board) Yuzhny, with limited buying taking place.

“Producers are not under pressure to sell at the moment,” said a trader.

The highest netbacks achieved by traders so far are around $630/tonne FOB and the enthusiasm for buying more urea at $650/tonne FOB has waned.

In complete contrast, Ukrainian urea producer Gorlovka sold 25,000 tonnes of granular urea at $710/tonne FOB Yuzhny for end of June shipment.

This was the first substantial sale of granular urea made from Yuzhny and reflected a large premium over prilled.

Similar strength was evident in the UK, where traders sold granular urea at £390-395/tonne CIF (cost, insurance and freight). Prices have moved up by more than £100/tonne ($197/tonne) since buying for summer shipment began.

While prilled prices stalled, granular urea has been supported by demand in the Americas and Europe and limited supply from the Caribbean.

“There is a shortage on granular and people are paying a premium,” said a trader. “People are starting to pay up in Europe and the UK.”

European demand continued to pull up Egyptian granular urea numbers.

Egyptian producer Alexfert sold 30,000 tonnes of urea for Europe at prices understood to be around $703-705/tonne FOB. This illustrated the continued strength of Egyptian granular urea, as the previous highest Egyptian sale came in early May at $675/tonne FOB, while values were pegged at $620/tonne FOB at the start of the month.

Qatari producer Qafco recently sold 30,000 tonnes of granular urea at $690/tonne FOB for June shipment to Brazil. This is the highest FOB price reported out of the Middle East for either prilled or granular urea.

In the US, granular urea prices rose around $50/tonne over the last two weeks to $650-655/short ton FOB Nola (New Orleans), as buyers stepped in to purchase available floating barges.

Traders Trammo reportedly purchased granular urea from producer PCS Trinidad for June and July loading at prices ranging from $685-730/tonne FOB. PCS will close the urea unit for turnaround in June.

High granular prices were also seen in other parts of the Americas. For example in Chile, Keytrade sold 25,000 tonnes of granular urea at a reported price of $820/tonne CFR (cost and freight) for June shipment from the US Gulf.

Despite the varied recent form, sources agree prilled and granular urea prices would firm once India entered the market.

“Both prices will definitely rise once India comes in,” said a trader.

“It will happen for sure,” added another trader. “When they step in there will be a shortage of urea.”

Urea is a nitrogen fertilizer used to boost the growth of crops including corn, rice and wheat.

($1 = €0.65/$1 = £0.51)

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By: Carl Roache
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