India triggers bull run in urea market

LONDON (ICIS) — The urea market continues its bullish run, with prices up by as much as $20/tonne as unexpected strong demand from India keeps global availability tight.

-India sole market mover

-Chinese supply tight

-Egypt at $280/tonne FOB

India surprised the market with its fourth successive tender in two months.

Demand in India is much stronger than expected, with more tenders expected in the next few months in order to meet requirements for kharif and rabi season.

India has bought 2.8m tonnes of urea via five tenders since April. A sixth one will close on 10 August.

“This rally took everyone by surprise. Until India gets its fill of urea, this market is not coming down,” said a trader.

RCF will close an import tender on 10 August, for shipment by 15 September. It is once again looking to buy 1m tonnes, but unlikely to get the required quantity, given the tight shipment period and limited global availability.

“RCF won’t be able to get more than 500,000 tonnes this time. And prices will keep rising,” said another trader.

Prices jumped further following the new tender announcement. Egyptian producer Helwan concluded a sale at $280/tonne FOB (Free on Board) for September, while Chinese business is heard at $270/tonne FOB.

The Chinese paper market has also been very active, while domestic prices have shot up.

Nola barge values have jumped from $220/short ton FOB to $250/short ton FOB for August shipment, in a week’s time.

The sudden and sharp jump in prices has led to some players getting cautious. as there are many long positions in the market.

“I am scared to go long at these prices. The minute anyone senses market changing they will dump product,” said a trader.

End users and buyers are shocked by the price increase; many realise that prices will keep climbing until at least October.

In Brazil, offers are now at $290/tonne CFR (Cost and Freight), but purchasing is slowing down. There is a chance buyers in Brazil may lock in immediate requirements and then step away until November.

It will take time for CFR markets to catch up with FOB levels. Most expect it to happen soon with the short term outlook bullish.

Buyers in South and Central America cannot delay purchases forever, with big demand likely in Mexico.

Focus article by Deepika Thapliyal