LONDON (ICIS)--Urea prices remain under pressure, dragged by by a weak outlook - which has hurt demand - in the wake of the coronavirus pandemic and its social and economic impact on the global economy.
- Urea prices expected to decline further
- Short covering in Europe, Turkey
- Indian import tender awaited
In the Black Sea, prilled urea is now being offered at $210/tonne FOB (free on board) - the lowest level in the world.
In the paper market, levels for June are $30/tonne below current prices, prompting greater caution among buyers.
“The market is heavy. Foreign exchange rates are worse. The (Turkish) lira and (Brazilian) real are in bad shape. Not a nice thing for demand,” said a trader.
Buying behaviour is also changing. Those who had planned to purchase on a quarterly basis are now buying monthly - adopting a hand-to-mouth approach - and despite current logistics issues, no buyer is in a hurry to book tonnes as production costs are declining.
Urea producers continue to operate their plants at optimal rates and there is no talk of a cut in output.
May and June are traditionally the weakest months of the year for urea demand.
Demand for industrial grade urea, which accounts for around 15% of the market, has already seen a big decline, and there are concerns that the corn industry - a key consumer of urea - could be hit by a lack of demand for ethanol.
In the US, around 40% of corn production is sold to the ethanol industry.
Liquidity in the market is expected to be ample as countries emphasise food supply amid the global pandemic. In the meantime, prices are expected to continue to fall.
Earlier this week, Egypt sold over 90,000 tonnes as traders covered short positions in Europe and Turkey.
India’s next import tender, which will be for over a million tonnes, is likely to take place at the end of April or early May.
There are some who believe that global trade flows will resume as soon as there is more clarity in the market, and expect this when coronavirus-related lockdowns end. Until then, the market is likely to remain under pressure.
Focus article by Deepika Thapliyal