FocusGlobal urea hits highs on big Indian deals

25 July 2008 18:31  [Source: ICIS news]

By Carl Roache

LONDON (ICIS news)--Global urea prices reached record highs for Black Sea and Middle East producers as large-scale Indian buying at levels of $820-850/tonne gathered pace, traders said on Friday.

More than 400,000 tonnes of urea were purchased by Indian Potash Ltd (IPL) this week under its long awaited tender.

Much of the product going to India was sourced from Yuzhny and the Middle East, causing prices in these regions - and others - to firm to record high levels.

IPL’s purchases ranged from $820/tonne (€525/tonne) CFR (cost and freight) up to as high as $850/tonne CFR for August shipment - the highest price ever paid in India for urea.

Including the tonnes bought ahead of the tender, IPL’s purchases for June-August shipment reached about 650,000 tonnes. India needs to buy large quantities of urea every month to meet its import target for the current year.

“The problem is that they [India] needs to buy,” said a trader. "As soon as they indicated there was buying interest the prices moved up."

The key benchmark Black Sea prilled urea price strengthened $30-40/tonne on the back of the Indian buying, up from $790-800/tonne FOB (free on board) Yuzhny at the end of last week.

Ukrainian producer Gorlovka sold prilled urea at $810/tonne FOB, while Ukrainian trader/distributor Agrofertrans (AFT) sold at $820/tonne FOB. By Friday, $830/tonne FOB was reportedly done.

Middle Eastern urea prices also continued upwards, buoyed by the Indian demand.

Saudi Arabia producer SABIC, UAE producer Ruwais Fertilizer Industries (Fertil) and Qatar Fertilizer Co (Qafco), all sold prilled urea to IPL at $815/tonne FOB - the first confirmed prilled urea sale out of the Arabian Gulf at more than $800/tonne FOB.

Qafco also sold 30,000 tonnes of granular urea to Yara for Brazil at $870/tonne FOB for August shipment – a record high price for Middle East urea.

Prices in other regions also reacted to the large scale Indian demand in recent weeks.

Producer Egyptian Fertilizer Co (EFC) sold 30,000-35,000 tonnes of granular urea to trader Helm at close to $900/tonne FOB for second-half August loading - a new high for Egyptian urea.

Egyptian prices started July at around $730/tonne ex-works.

Despite the rapidly rising prices and the expectation of high Indian demand now through to the end of the year, there are signs that the rising prices in the Black Sea may soon slow.

Turkish producer Igsas is holding a sales tender for 30,000 tonnes for August shipment. As a result, Turkey will take less Yuzhny urea than usual in August and September as these tonnes will likely stay domestically.

Also, urea prices stabilised in the US. Granular urea prices stalled around $820-825/short ton FOB Nola (New Orleans) this week, slightly softer than the levels seen at the end of last week.

The US is one of the largest importers of urea globally, purchasing around 6m tonnes/year.

“Yuzhny will stabilise rather than move up now that India has wrapped up its material for the moment,” said a trader.

“I think they will stay around this level, until India comes in again.”

Indian fertilizer demand outstrips domestic supply. As a result, the Indian government imports large quantities of urea through trading agencies IPL and MMTC.

($1 = €0.64)

For more on urea visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Carl Roache
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