Global urea market seeks direction as uncertainty over price direction persists

LONDON (ICIS)–The global urea market has been drifting aimlessly in the absence of fresh signals. Buyers are not keen to bid on uncertainty about price direction and a growing feeling that levels could decline in the near future.

‘It has been an uneventful week, so quiet. It is difficult to find bids anywhere with the sentiment being negative,’ said a Switzerland-based trader.

In Egypt, Misr Fertilizers Production Company (MOPCO) has been able to place 180,000 tonnes of granular urea under a formula deal for shipment to Latin America in four cargoes. These shipments, to be made in April-September, would ease some inventory pressure in the coming months, as European demand shows no signs of improving.

Turkish buyers are expected to return next month, while there is also demand for April cargoes from Thailand. However, southeast Asian markets are already flooded with offers from the Arab Gulf.

“The season is coming in Thailand and water levels are also good. But there are too many people offering so it is impossible to achieve a higher price. Every seller wants to dominate Thailand,’”said a southeast Asia-based trader.

There is also talk of exports from the US into Brazil as the domestic barge market remains depressed. Barge prices in New Orleans fell below $240/short tonne FOB (free on board) Nola this week.

“People are afraid of the market globally turning down and are operating out of fear. It wouldn’t shock me if we don’t get going (because people wait) for it to fall further,” said a senior American trader.

Netbacks from Brazil are lower but Arab Gulf suppliers continue to hold their offers around $260/tonne FOB, having already sold substantial tonnes for April.

Iran is also sold until mid-April as it is shipping over 400,000 tonnes to India and another panamax for China this month.

Baltic business is slow from ice ports such as Kotka and St Petersburg given the unavailability of vessels with ice breakers. Several offers are heard in Latin and central America from the Baltic as producers try to place tonnes.

Chinese production rates are closely being watched especially with mixed news of higher gas supply in some provinces and cutbacks in other provinces being reported.

Chinese producers have ramped up operating rates to 58-60%  after the Lunar New Year holidays (15-21 February). However, strict pollution controls by the government are expected to continue keeping production levels in check while suppliers are also cautious about flooding the market with too much product. As a result, rates may not increase above 65% on a continual basis in the summer, according to early estimates.

Focus article by Deepika Thapliyal

Additional reporting by Mark Milam