Urea buyers shy away from commitments on negative price outlook

Author: Deepika Thapliyal

2019/02/15

LONDON (ICIS)--Urea producers in every market are offering product at lower prices, but few of these are finding takers.

- Egyptian sale at $10/tonne discount

- US demand eyed

- Chinese operating rates increase

VARIOUSInternational urea prices have lost 20-25% in value since the market started shedding its gains three months ago.

But buyers are still not committing, with most import markets out of season or amid expectations of a further decline in prices.

Producers are keen to accept any firm bids and are even looking at non-traditional markets for sales because of inventory pressure.

“There is no real demand anywhere. It's best to confirm any bid you get, but buyers don’t want to confirm anything,” said an international trader.

Egyptian granular business was concluded at an eight-month low of $250/tonne FOB (free on board) for Turkey, while prilled business in Russia has been done below $240/tonne FOB.

There is no real demand on the horizon and the general expectation is prices will remain under pressure in February and March.

Contrary to expectations of a price recovery in end February or early March, most market participants expect now a pick-up only in April, helped by firm crop prices.

The next Indian tender is expected in March while demand in the US, Europe and Australia is likely to improve only in the second half of March, or April.

Prices in Brazil have declined to levels last seen in May 2018 with demand expected to return only in May for the new season.

NO BOTTOM IN SIGHT
Some market participants were predicting a floor for the market at current levels, but it does not look like these levels will hold.

“It is a bath of blood. It seems there no sight of the bottom still,” said a major buyer in Latin America.

There is a lot of caution in the market and most traders are weary of going short, despite the weak sentiment, as any recovery is likely to be sudden and significant just like the recent collapse has been.

“This market could change quickly. US has to buy, maybe not now, but it could change quickly. There could be a lot of demand for April-May shipment. Wheat prices are good,” said another trader.

The US is oversupplied at the moment but outlook for spring demand remains firm as the weather is improving and urea application is likely to be higher to make up for lost ammonia.

Meanwhile, Chinese producers have chosen to focus on the domestic market which offers better netbacks, even as operating rates increased to 60%, from 50%, before the Lunar New Year holidays earlier this month.


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Pictured: Bags of granulated urea fertilizer in a barn in the UK
Source: Eco Images/Uig/REX/Shutterstock

Focus article by Deepika Thapliyal