FocusPrilled urea prices soften on slowdown

06 June 2008 17:09  [Source: ICIS news]

LONDON (ICIS news)--Black Sea and Baltic prilled urea prices have weakened due to a slowdown in Latin America and the continued absence of India buyers, traders said on Friday.

 

Urea trading was thin in the Black Sea over the past week, which resulted in price idea softening slightly.

 

Ukrainian producer Cherkassy sold urea late last week at $650/tonne (€416/tonne) FOB (free on board) Yuzhny and just above, however, these numbers are no longer attainable.

 

On Friday 6 June, the key benchmark prilled urea price was pegged at $620-630/tonne FOB Yuzhny, around $20-25/tonne weaker than the previous week.

 

Pressure is also evident in the Baltic Sea, where producers are finding buyers scarce at asking prices of $620-630/tonne FOB.

 

For example in St Petersburg, trader/distributor PhosAgro is offering its June availability at $625/tonne FOB, but no buyers are reported.

 

Out of Riga, Russian trader/distributor Citco has early July cargoes, but interest is limited and traders are not bidding.

 

Price ideas are upward of $610/tonne FOB Baltic, compared to $620/tonne FOB plus at the end of last week.

 

The continued absence of Indian buyers and the lack of buying in Latin America caused these prilled urea prices to recede.

 

India’s State Trading Company (STC) did not announce its long-awaited tender this week. STC was expected to enter the market to buy up to 650,000 tonnes of urea on a formula basis, with Indian Potash Limited (IPL) to follow with its tender soon after.

 

However, now there are rumours that STC and IPL will wait for a few more weeks before buying.

 

Following lots of recent activity in countries including Ecuador, Chile,Uruguay and Brazil, few new purchases were noted in the Latin America this week.

 

This added to the bearish sentiment in the Baltic and Yuzhny.

 

In Brazil, offer prices fell from $710-715/tonne CFR (cost and freight) last week, to $700-705/tonne CFR currently.

 

Buyers purchased June cargoes early and are watching the slight softening in urea prices with interest to see whether levels below $700/tonne CFR become available again.

 

“They [buyers] see India sitting and waiting and they want to support it,” said a trader.

 

Despite the bearish sentiment on prilled urea in the Black Sea and Baltic, in other regions, prilled urea remains bullish.

 

For example Indonesian state-owned urea fertilizer company Pupuk Iskandar Muda (PIM) sold prilled urea at $738/tonne FOB this week.

 

At the last Indonesian export sales tender in November 2007 the highest bid came in at $350.50/tonne FOB, which shows that Indonesian prices have more than doubled since then.

 

Strong international demand and tight supply due to the absence of China from the export arena were the main causes of this dramatic price increase.

 

Also, granular urea remains strong globally. Producer Egyptian Fertilizer Company (EFC) recently sold small quantities to Greece at $720/tonne FOB Damietta, around $100/tonne higher than Egyptian granular urea was fetching at the start of May.

 

“People started to pay a premium for granular urea,” said a trader.

 

“It is tight and people prefer granular in some markets.”

 

Granular urea was also selling well out of the Middle East. Saudi Arabian producer, SABIC, sold over 20,000 tonnes of granular urea to an Asian market, believed to be the Philippines, at $710/tonne FOB.

 

Despite the slight softening seen in the Black Sea and Baltic, when India does finally start buying, urea prices will rise on the back of it, said sources.

 

“As soon as India comes in the market, prices in the Baltic and Yuzhny will go up sharply,” said a trader.

 

($1 = €0.64, $1 = £0.51)

By: Carl Roache
+44 20 8652 3214

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