Urea Market in week ending to August 1st 2019

Urea Market in Brief

Urea prices in most areas are being corrected by Indian tender shipments now ended their price support. Hence Middle East urea sold at USD270/MT FOB. Egypt also traded at USD265/MT FOB this week. Traders have sold Chinese granular in the mid-USD270s/MT FOB and are betting that prices will go below USD270/MT FOB. 

The dominant factor is limited market demand and buyers are waiting fot the next month or so. Producers have their quantities for second half of August to sell and compete with traders selling short. 

Asian prices are set to stay weak until the next Indian tender been announced. In the west, Brazilian buying which has picked up this week and the European market activity will determine the length of correction. 


Market Forces

  • Currently rather than South American markets, few other countries are active and buying urea at present.
  • In China, producers are trying to keep prices at USD375/MT FOB however they are under pressure from a slow domestic market and production running near 160,000MTper day.
  • In India, buying for July tender is finished and there is no tender been expected until September considering the large tonnage bought in July.


Market Outlook in Next Month

The prices have begun to correct downwards. Traders are selling short and buyers can see an opportunity for cheaper tonnages over next month. 


Asia

Turkmenistan

The Garabogaz plant is reported to have stopped production last week and is expected to remain down for two-three weeks for maintenance. The producer is understood to have no stocks. State holding company Turkmenhimiya sold 4,000t of granular urea from its Mary plant at $160/t ex- works this week for shipment over the next four months. The seller requires 100pc prepayment. 

The price is $25/t lower than last done business in May. Another 21,000t of granular urea ex-Mary
 are on offer at $185/t ex-works via the exchange in Ashgabat. Turkmenhimiya is offering two lots of Garabogaz urea totaling 300,000t at $160/t fob Bekdash, for delivery over an extended period.




India

Suppliers have now nominated all but four of the 36 vessels due to load under MMTC’s 1 July tender. With at least five vessels scheduled to load in Tianjin port in China, it remains to be seen all the shipments meet the 16 August deadline. The good news from India is that the monsoon has recouped most of the shortfall evident in June. The meteorological department reported on 31 July that rainfall was down 11pc against a five-year average, compared to 35pc at the end of June. 

Heavy rains are continuing across much of the country. Madras Fertilizers announced on 30 July that it had resumed production of ammonia and urea at its plant in Manali. The ammonia and urea plants were shut down on 1 April to undertake feedstock conversion work and annual maintenance. The urea plant has a capacity of 487,000MT/yr. 


China

The Chinese market is moving into the summer low season for urea and demand is small. Purchasing for India is complete and there are no other large offshore markets for Chinese exports. Production has not fallen to match lower demand. The sluggish methanol market has prompted some producers to switch to urea, increasing urea output to around 160,000MT/day compared to 153-157,000MT/day last week.

In the export market, prices have dropped to USD275-278/MT FOB for prilled urea. Traders have sold forward at prices equivalent to USD270/MT FOB China in Sri Lanka. Granular urea offers from some producers are still around USD280/MT FOB for second half August, while traders are offering product at USD274-276/MT FOB. International traders expect prices to drop to USD270/MT FOB and below in August-September and are not bidding for large cargoes.


Middle East 

Granular urea prices fell this week as the first spot cargo traded for second half August shipment. The quiet market in Asia means there are no potential spot markets in the region, obliging suppliers to seek business in the Americas.


Iran

Traders are seeking vessels to load 50,000MT of granular urea prompt in Assaluyeh for Longkou, China, and 10,000MT for Umm Qasr, Iraq, plus 25,000MT to load from Bandar Abbas for Myanmar. 


Africa

Egypt

Abu Qir held a tender on 30 July to sell 25,000MT of granular and 25,000MT of prilled urea for second half August shipment. It sold 15,000MT of granular urea at USD265/MT fob and 15,000MT of prilled urea in the low-USD260s/MT FOB to several traders. The cargoes are for second half August shipment. The granular urea price is USDUSD15/MT below the level at which Abu Qir sold for first half August. Other producers stayed out of the market this week, waiting to see the result of Abu Qir’s sales tender before offering August tonnage.


Report By: Naeemeh Ferdowsi

4 August 2019