Urea market in shock as Indian tender fails to prop up prices

LONDON (ICIS)–The recent decline in urea prices has come as a complete shock for market participants, especially after the Indian tender absorbed a large chunk of supply for the next one month or so.

– Egyptian prices at two-month low

– Brazilian prices collapse on oversupply

– Fresh Indian tender awaited

“The bottom line is: there is no buying. The market is changing and everyone is just waiting and seeing what happens next,” said an international trader.

Demand is thin, especially for December cargoes, with four to five unsold cargoes arriving from the Arab Gulf into Brazil, according to sources.

“The surprise is that so many floaters from AG [Arab Gulf] are still going to Brazil. There seems to be so much spare product from AG,” said another trader.

There is little activity in Turkey, while European buyers are only expected to return in the New Year.

Latin American buyers are also on the sidelines.

This has meant lack of interest for North African and Russian cargoes with prices in Egypt dropping to $305/tonne FOB (free on board) and prilled levels in Russia around $290/tonne FOB.

“Buyers are trying to run away. Markets are bearish and this is an effect of the longs carried over into December. We will be lucky to be above 300 [$/tonne FOB] at the end of the year,” said an Asian trader.

Significant participation by Chinese players in the Indian tender – estimated at around 500,000 tonnes for China-origin material – has been another surprise, as this comes due to the lack of domestic demand even as operating rates have dropped to 52% for Chinese urea plants.

Another 250,000-300,000 tonnes of re-export cargoes are likely to be supplied from China to India.

The only demand expected is another tender from India,  which is forecast in end-December or January.

South Asia is also expected to step in with tenders for around 150,000 tonnes in total due from Sri Lanka, Bangladesh and India in December.

Outside of south Asia, there is no demand and, even in southeast Asia, buyers are looking to renegotiate business at lower levels.

Pictured: An Indian farmer sifting through rice
Source: Design Pics Inc/REX/Shutterstock

Focus article by Deepika Thapliyal

Additional reporting by Julia Meehan