Urea Market in Brief
In Urea market, a quiet week was passed apart from the scramble which covered Indian market. In many countries the harvest season and some holidays have reduced market activity and buyer are looking forward to offer levels for the second half of August.
An estimated 250,000 MT of Urea for India and traders’ attempt to buy this shall support the next two weeks price. There was a sales of approximately 50,000 MT prills from Baltic suppliers at USD 265-266 FOB for India. Also Chinese prices edged up to mid USD280s per MT FOB basis.
However an Egyptian tender observed European markets’ price dropping to USD280 per MT FOB which hints at lower prices for August. Moreover, an Algerian cargo is on offer in the USD270s per MT FOB with end of July shipment.
Market Forces
Market Outlook in Next Month
Traders are snapping up urea in Asia, which will keep prices firm in first half of August. Outlook uncertain thereafter.
Asia
Turkmenistan
The Garabogaz plant restarted late last week and resumed urea shipments on 12 July. The producer has yet to reach full capacity, with the current operating rate reported at 2,000MT/day. Stocks at the factory are estimated at 8,000MT. There are unconfirmed reports the plant may shut down for planned maintenance in August for two-three weeks. State holding company Turkmenhimiya is offering 100,000MT of Garabogaz urea via the exchange in Ashgabat at USD160/MT FOB Bekdash basis prepayment. Another cargo, 25,000MT of Mary urea, is on offer at USD185/MT ex-works.
Azerbaijan
Socar has sold 25,000MT of granular urea for August-December shipment to Agroleasing, which belongs to the ministry of agriculture, for distribution in the domestic market. Some 30pc of the plant’s 660,000MT/yr output is earmarked for the domestic market.
According to Socar, the plant has so far produced 60,000t of urea. About of 45,000t of this were shipped for export under tenders, and 4-5,000t to local companies including Azfert and Agroleasing. The plant has been down for around two weeks to allow the handover of the plant from the EPC contractor to Socar, but the factory has restarted and is expected to reach full capacity in late July–early August.
India
A sizeable problem is emerging with deliveries under MMTC’s July tender. Traders collectively appear to be 250-300,000t short of the 1.7mn t total needed to load by 16 August. Given the logistical situation in China, it is highly unlikely that the contracted tonnages can all be shipped within the deadline.
Traders are already covering some shipments from non-Chinese sources at loss-making levels, but have few options remaining. Chinese suppliers have written to MMTC asking for an extension of the shipment period by 20 days, but MMTC has refused.
China
Export
A total of 14 urea cargoes are reported sold for India, 5 cargoes via Tianjin port, 2 from Qinhuangdao, 2 from Jinzhou, 1 from Lianyungang, 1 re-export cargo from Yantai, and 3 other re-export caroes. Based on 55-60,000t cargoes, this amounts to about 800,000t against a requirement for more than 1mn t to come from China.
Prices for prilled urea have moved up from initial agreements at $276-278t fob to $280-282/t fob. ChinaCoal has sold two granular urea cargoes for the tender at around $280/t fob through Jinzhou and Lianyungang. Loading will start next week.
Domestic
Despite the high level of export activity, urea prices have fallen in the local market. Prices for prilled urea in Shandong province are down to Rmb 1,830-1,870/t ex-works bagged. This is still slightly above export prices, however. Demand is still active in in central and southern China, but is insufficient to keep the prices stable. To resist the inflow of urea from other provinces, producers in the regions have to cut their prices.
Producers believe that domestic supply could be tight for the fall season. Firstly, almost all prilled urea inventory has taken by traders for India. Secondly, China will hold a big event on National Day (1 October) this year to celebrate the 70 year anniversary of the founding of the People’s Republic.
The big event is likely to impact urea production in Hebei, Shanxi, Shandong and Henan. Logistics and shipment will also be affected.
Middle East
There are no confirmed new spot sales this week in the physical market. Omani urea is under discussion for second half August loading, but has yet to be sold. Granular urea traded several times on the paper market at $275/t fob for August, giving an indication of where traders expect prices to move.
Iran
Producers are sold out for first half August and any lower prices could only apply to shipments later in the month.
Africa
Egypt
Abu Qir held a tender on 16 July to sell 25,000MT of granular urea for 25 July-10 August shipment. It sold the full quantity to a single buyer at USD280/MT fob. Helwan Fertilizer completed its maintenance turnaround last week and has resumed production at its plant this week. It will begin to sell for August in the coming week.
A trader will load 25,000MT of granular urea in Damietta 1-10 August for Paranagua, Brazil. Midgulf will load 45,000MT of prilled urea in Adabiya in late July for Dahej, India. A 50,000MT cargo of granular urea has also been sold for end-July/early-August shipment to India.
Report By: Mehrdad Najafi
