18 July 2008 14:04 [Source: ICIS news]
By Carl Roache
LONDON (ICIS news)--Worldwide urea prices have jumped to record highs and were expected to continue to rise on the back of a surge in Indian and US demand, traders said on Friday.
The announcement of Indian Potash Limited’s (IPL) long-awaited tender and US buying on the back of supply concerns, caused global urea prices to surge this week.
There was urea buying in other regions, but the US and India were the key drivers behind the price rises.
India and the US are the two largest importers of urea globally, purchasing around 5.5m and 6m tonnes per annum respectively.
After months of anticipation, this week IPL issued a tender for an unspecified quantity of urea for shipment in July and August.
The tender, for both prilled and granular urea, will close on 19 July, with offers requested to remain valid until 22 July.
Prior to the announcement, IPL bought several cargoes from traders. However, substantial tonnage was still required and it was estimated that IPL would aim to secure another 600-700,000 tonnes of urea under the tender.
This development in India prompted prices in several regions to rise.
In the key benchmark Black Sea market, prilled urea prices rose to a new high of $770/tonne (€485/tonne) FOB (free on board) Yuzhny, up from $740/tonne FOB at the end of last week.
"Traders are taking positions," said a trader. "Because of India, there is a run for the tonnes in Yuzhny."
As a result, Black Sea sellers were in bullish mood. For example, trader/distributor Agrofertrans (AFT) was yet to sell any of its August tonnes and was targeting $800/tonne FOB Yuzhny.
The strength of the US market was also contributing towards firming international prices.
Concerned about tight international supply through quarter three and uncertain about how much urea would be available from China in quarter four, major US buyers increased their early purchases.
At the end of last week, traders sold barges of granular urea at $780/short ton FOB Nola (New Orleans) for prompt/August delivery.
By the end of this week, prices had risen to $830/short ton FOB for the same delivery period.
"There is a lot of demand there to be covered. On granular urea, there are no cheap options around," said a trader.
A robust US market combined with the massive Indian requirement to push Egyptian prices further upward.
This week, Egyptian Fertilizer Company (EFC) was negotiating a 20-25,000 tonne parcel of granular urea for second half August shipment at around $900/tonne FOB.
Another Egyptian sale was reported to have taken place at $850/tonne over the past week.
This represented a substantial rise on the last price of July business, which was agreed around $790-795/tonne FOB for shipment to the US - a record high price itself at the time.
With demand strong in several regions, global urea price expectations for the coming weeks remained firm.
"If India buys a lot then people will take new positions. We expect high prices [in the tender] next week," said a trader.
"I think prices will rise," said another trader, who talked of limited supply options for the US and India.
"I am sure $800/tonne FOB Yuzhny will be paid if it has not already. There is definitely a urea shortage," the trader added.
($1 = €0.63)
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