LONDON (ICIS)--The international urea market has been nervous this week as it finds itself at a crossroads as future trade looks increasingly dependent on India's ability to continue buying Iranian product after US sanctions are re-imposed.
"There is a lot of [urea] cargo, but no demand. We see some adjustment in prices from the beginning of next week if India doesn’t announce a tender," said an international trader.
If India finds a resolution to payment issues with Iran, it will be business as usual and even likely to be negative for pricing.
However, if India was unable to buy Iranian urea because of pressure from the US, this would have a major bullish impact on international prices.
"Right now there is a possibility market could collapse, there is no demand. But if Iran does not feature in the Indian tender, them market will go up, and it will go up in a big way. Let's see, Indians are still evaluating," said an Asian trader.
India buys around 1.6m tonnes of urea from Iran annually. If there is no resolution with Iran, the country would have to look at other origins who are bound to price their tonnes higher, given the high volume involved.
As of now, there is no clarity over the Indian and Iranian situation.
New Delhi is still looking at ways to pay Iran for its urea while at the same time maintaining its ties with the US.
"The Iran currency [financing] problem can be solved. The problem is the US. Indians don’t want to antagonise the US. And now US and Iran are both squeezing the Indians," said an Indian trader.
There has been a lot of market talk about the Indian tender, but with ports continuing to be saturated with material and the Iranian issue yet to be resolved, it is not clear if the tender will come in the next week as expected.
Outside of India, there is little demand in the market.
Brazilian levels have declined this week, while there was no fresh demand in Latin and Central America.
According to media reports, Brazil's lower house of Congress has agreed a decree setting minimum prices for truck freight which could increase transport costs by at least 20% and lead to further logistical and warehousing issues.
Egypt is yet to do any fresh business while sales in the Arab Gulf were concluded in a wide range this week. Netbacks from Brazil and Sri Lanka were lower, while premium business was done to South Africa.
Turkish demand remains thin, with interest only for Iranian cargoes while European buyers are busy taking deliveries, with no fresh business agreed.
There is demand in south Asia, with Sri Lanka awarding a major tender this week and issuing another one to close later this month.
There is also talk of an import tender from Bangladesh for a significant quantity in August, while Nepal recently closed two import tenders.
Thailand is brimming with Arab Gulf cargoes although there are pockets of granular demand in Vietnam and the Philippines.