Urea prices firm internationally as Brazil, India boost sentiment

LONDON (ICIS)–International urea prices have firmed, with buyers short covering in anticipation that prices could increase further.

– Brazil buyers paying up

– India issues import tender

– Chinese supply expected to increase

Brazil is the key support for pricing as demand emerges for July and August, with cargoes priced at higher levels.

India has also announced an import tender, and could absorb up to 1m tonnes from the Arab Gulf, North Africa, Ukraine and Russia, subject to pricing.

China’s participation would depend on pricing; its absence from the export market has been another support for prices, but this could soon change.

Chinese producers are selling domestically in June, but are expected to be back with significant presence in July-August, which in turn is expected to temper any price increase.

Over the course of last week, prices increased at a quick pace with an Algerian sale in the mid-$230s/tonne FOB (free on board) for July shipment.

Granular business was concluded at $8/tonne increase in Egypt for July shipment, likely for Latin America.

The Arab Gulf achieved $217-220/tonne FOB in fresh granular business, up $4-7/tonne.

The Baltic also traded at $220/tonne FOB for a granular cargo as a buyer covered a position for Central America.

LONG TERM: HOLD YOUR HORSES
Despite the short term optimism, the market remains cautious in the longer term, especially with China expected to start exporting soon.

“We don’t see any downward pressure unless China starts to supply. They may only do 150,000 tonnes this time for India (in 19 June tender). But from the tender after that availability would be more,” said a producer.

Unsettled macroeconomic conditions across the global are also creating jitters across the industry.

Because of the coronavirus pandemic, buyers and sellers are facing financial problems, with late payments beyond the typical 90-day payment terms.

New supply is also expected in the market in 2021, with Nigeria’s 1.3m tonne/year Dangote plant expected to begin exports in the first quarter.

The start-up of Indorama’s second 1.6m tonne/year urea line is also likely to be completed by the end of December.

In northwest Europe, prices started to move up on the back of pockets of demand emerging and gains seen in Egypt and elsewhere internationally.

In the Turkish urea market, there is no shortage of material from Iran, with plenty of product in storage.

Egyptian tonnes are not currently competitive enough in price. Urea is priced at $220-225/tonne duty paid ex-warehouse.

Sellers of Iranian urea are aware the season is nearly over in Turkey, and are therefore offering aggressively.

Egypt proved an active part of the world in terms of sales and price developments, with MOPCO, FertiGlobe, amd Kima all active.

Sellers of Egyptian urea talk of healthy local demand and comfortable stock positions through June and into July.

Following a gradual decline in Egyptian urea price in H1 March, prices have been on a steady incline since mid-May.

Commitments to India and top up tonnes in Europe have supported the market.

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Front page picture: Soya fields being harvested in Correntina Bahia, Brazil; archive image 
Source: Sebastiao Moreira/EPA/Shutterstock 

Focus article by Julia Meehan

Additional reporting by Deepika Thapliyal