Global urea stalls on weaker sentiment, India wait

08 August 2008 15:51  [Source: ICIS news]

By Carl Roache

LONDON (ICIS news)--Global urea prices have stalled on the back of weaker international sentiment as traders wait for further buying indications from India, markets sources said on Friday.

However, with India expected back in the market soon, it is deemed more of a pause in upward movement then the start of a price reversal.

At the end of July, global urea surged to record highs on large-scale Indian buying but prices in several markets have since stabilised, and in some cases, fallen.

Traders are reluctant to go long at increasingly higher prices without indications from India regarding when it will re-enter the market.

Activity is very low in the key benchmark Black Sea region, with no new sales reported. Prilled urea prices ended the week assessed at $810-820/tonne (€527-533) FOB (free on board) Yuzhny, a fall of $5/tonne from last week.

“It has been a quietish week,” said a trader. “People are waiting for India and other markets have not really stepped up at the moment.”

A price correction was seen in Egypt this week. Producer Helwan Fertilizers closed a sell tender on 5 August for 25,000 tonnes of granular urea for August shipment.

Local trading company Hagrpota took the award at $850/tonne EXW (ex-works), equivalent to around $863/tonne FOB (free on board) and around $37/tonne lower than the business reported by producer Egyptian Fertilizer Co (EFC) a few weeks ago.

Also in Egypt, producer Alexfert sold 15,000 tonnes of urea to traders Koch, Hagrpota and Unifert for August shipment to Europe.

The price was understood to be $860-870/tonne FOB – again, a large fall from the $900/tonne FOB secured by EFC in July.

As in the Black Sea, weaker international sentiment in the absence of India made traders reluctant to pay end of July prices.

The weakened prices of crops including corn, soybeans and wheat contributed to the negative pricing trend, by denting the confidence of buyers, particularly in the US.

The US is the second largest importer of urea, consuming more than 6m tonnes last year. This market saw a $20-30/tonne drop in granular urea prices this week, ending around $770-807/short ton FOB Nola (New Orleans).

“The corn price has the biggest impact there,” said a trader. “People are waiting [to buy urea] as they see the price falling.”

The trader added that the US market had been very bullish since mid-July. Thus the recent downward movement was seen as the market settling to more appropriate levels on lower crop prices.

Despite the current price stall, the overall tone of the global urea market remains firm.

India, the world’s largest urea buyer, still requires an estimated 5m tonnes for delivery through to March 2009 - an average of 700,000 tonnes/month - thus ensuring substantial, consistent demand.

Moreover, it was looking increasingly likely that China would increase export taxes on all fertilizers to the end of 2008. The effective absence of this major exporter will ensure global tightness of urea in the medium term.

This will be particularly significant for India and the US, two traditional consumers of China urea.

“The Indians still have a lot of product to buy and when they come they will buy aggressively,” said a trader.

“Prices will certainly firm up again. I do not think the Indians will wait very long.”

($1 = €0.65)

For more on urea visit ICIS chemical intelligence
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By: Carl Roache
+44 20 8652 3214



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