27 August 2009 21:08 [Source: ICIS news]
By Carl Roache
Reduced natural gas costs in the
Market sources report that Ukrainian fertilizer producers will benefit from lower natural gas costs as from 1 September following a new government initiative.
The exact reduction was not clear as market reports vary.
However, a decrease of around 15% delivered to site was most commonly reported.
Reduced gas costs mean lower urea production costs, which could see breakeven levels for urea production fall to $215-225/tonne (€151-158/tonne) FOB (free on board) depending on the plant.
“With the gas prices in Yuzhny falling this will certainly impact [prices]. It means some plants will offer urea at lower prices,” explained an Asian trader.
“My feeling is that the prices will be under pressure for sure,” said an Egyptian urea producer.
“The Ukrainians have lower cash costs of production, so we will see the price ideas of traders around the floor level.”
Added to this, the Indian and
The Saudi Arabian government has agreed to provide $100m to
This amount would cover the purchase of about 350,000 tonnes of urea at current prices and is likely to satisfy
This is significant news as
In addition, Indian market sources have started to forecast a fall in urea demand for 2009-10 due to the lack of rain in parts of the country. About 20% of the rice area has not been planted due to lack of rain, local sources said.
Sources estimate that urea demand could fall by 10% this year, equivalent to about 2.5m tonnes.
A Black Sea urea trader/distributor said urea prices would not see any sharp price rises without notable demand from
“At the moment, people are waiting on
Following a sustained period of strength in June and July, the
Falling crop prices and slumping natural gas costs are weighing heavily on urea market sentiment.
At the beginning of May, corn prices were around $4.05/bushel, but have subsequently fallen to around $3.20/bushel.
On top of this,
Global urea prices have already started to fall on the back of this wave of bearish news.
This week, Egyptian urea was purchased at $258/tonne FOB for September shipment.
Egyptian urea was purchased as high as $282/tonne FOB for August shipment.
As an importer of urea, US market prices are also following international prices downward.
Barges of granular urea dropped to $270s/short ton FOB Nola (
“We are stuck with the world market so if that comes down it affects the [
European buyers were also expecting lower urea prices on the horizon.
“I think a decrease in the price will come again,” said a European trader/distributor.
($1 = €0.70)
Additional reporting by Steve Mitchell
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections