FocusBlack Sea, Mideast prilled urea plateaus

01 August 2008 15:22  [Source: ICIS news]

By Carl Roache

LONDON (ICIS news)--Black Sea and Middle Eastern prilled urea prices have plateaued with producers unwilling to reduce prices after last week's surge on the back of massive Indian buying, traders said on Friday.

More than 400,000 tonnes of urea were purchased between $820/tonne (€525/tonne) CFR (cost and freight) and $850/tonne CFR by Indian Potash Ltd (IPL) under its tender last week.

This buying spree pushed urea prices up in several regions, including the key global benchmark levels in the Middle East and Black Sea.

Traders withdrew this week as there were no clear indications from end markets that current Black Sea FOB (free on board) Yuzhny levels would be absorbed, preferring to wait and see rather than continue going long at around $820/tonne FOB.

Despite limited buying interest, Yuzhny price levels remained fairly stable.

"There is limited availability for August, it is more or less done," said a trader. "Physically there is just no product so producers are not willing to reduce prices."

Moreover, rumours that the Chinese export tax could be increased in the fourth quarter prompted a revival of interest among certain traders and supported the producer stance.

Sales at $820/tonne FOB Yuzhny took place this week. Ukrainian trader/distributor Agrofertrans (AFT) sold 20,000 tonnes of prilled urea to traders at $820/tonne FOB Yuzhny for first half August shipment.

Yuzhny prices were assessed at $815-825/tonne FOB, largely unchanged from last week.

Price stagnation was also evident with Arabian Gulf prilled urea.

This week Qafco Fertiliser Co (Qafco) confirmed its optional 30,000 tonne prilled cargo with IPL at $815/tonne FOB for August/September shipment - the same price as was awarded last week.

This suggests short to medium-term selling opportunities for AG prilled urea are far less appetising than for granular urea, which hit a record high $870/tonne FOB last week.

Despite the current stall in price, there are no signs in either market that numbers will fall notably in the short term as there is enough demand for prilled urea from other regions to maintain current levels ahead of the next round of Indian buying.

"Argentina has quite substantial demand, as well as Brazil and west coast South America," said a trader.

"That will hold the prices in the meantime before India comes."

Indian buying agency MMTC has started to contact urea producers prior to its next tender. Expectations are that India will return to the market early-to-mid August.

Traders expect India’s return to the market to force global prices up once more.

"If they come back again you have to look at what will be available to offer," said a trader. "There is not that much product available so prices will definitely be higher than last time."

India is the world’s largest importer of urea, purchasing 6.5m tonnes last year.

($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
+44 20 8652 3214

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