Big-ticket Indian urea purchase fails to boost prices

LONDON (ICIS)–International urea prices are declining even as India’s MMTC has stepped in to buy 1.7m tonnes in its latest tender.

– Indian tender gets bumper response

– China to export large volume to India

– Brazilian prices fall below $280/tonne CFR

Bags of granulated urea; archive image. Source: Eco Images/Uig/Shutterstock

“No matter how many LoIs [Letters of Intent] are issued in India, it shows people are prepared to sell at a lower price, which is a weak sign and bearish,” said an international trader.

A producer added: “We have a surplus of 2m tonnes worldwide”.

Prices in the tender, at around $293-296/tonne CFR (cost and freight), were below last concluded levels.

Aggravating matters for suppliers is the lack of demand in other importing hubs.

“Prices in Turkey and Brazil are going south. And that can’t change, no matter how India books,” said the trader.

India is also likely to wait at least another two months before it steps back in the market with a new tender.

Click on graph to enlarge

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Questions also remain on where traders will source such a large quantity for MMTC as there is unconfirmed talk trades may have short sold around 500,000-700,000 tonnes in the tender.

There is also concern of delays because of logistical issues in China, with an unusually high number of ships due to load over the next 40 days.

An estimated 700,000-1m tonnes is expected to be covered from China to India.

“Logistically, it may not be possible to move all the tonnes from China as only Yantai, Tianjing and Qinghuangdao ports accept urea export nowadays,” said a local source.

Another 150,000 tonnes would be shipped from the Arab Gulf while some cargoes are also expected from the Black Sea, possibly Azerbaijan and prilled shipments from Egypt.

Iranian re-export cargoes are also likely to feature in the Indian tender.

In Brazil, prices have declined below $280/tonne CFR as traders struggle to place cargoes in the presence of significant availability of Iranian cargoes.

“Everyone facing problems selling into Brazil. Buyers know they can wait,” said another trader.

The domestic market in New Orleans is also correcting downwards on lack of demand and has dropped to the mid-$240s/short ton FOB (free on board) Nola.

Focus article by Deepika Thapliyal