Global urea prices hit 2020 lows on uncertainty

LONDON (ICIS)–Throughout the global urea market, prices have started to decline because any forward buying has effectively been put on hold in the wake of the coronavirus and its devastating impact on the global economy.

One global distributor told ICIS, “The main question is… when prices keep falling, at some point people will think it’s cheap and come back to buy and bottom fish. [However,] it has to be one big player to start.”

It named a number of major players, adding that smaller companies would be unable to take on the financial risk.

“Not one trader is brave enough to go long,” it added.

The trader also touched on turnarounds, which have yet to be seen in the fertilizer market during the current global pandemic. Should there be a slew of outages during the summer, when countries are expected to come out of lockdown, it could see a boost in demand.

In terms of regions, urea prices have eased across nearly every location week on week. The Baltic and Black Sea are now close to $200/tonne FOB (free on board) – the lowest level this year.

Arab Gulf prilled prices have come under intense pressure as Bangladesh has delayed offtake shipments. Business was concluded at $220/tonne FOB – the lowest level in two-and-a-half years.

The announcement of a long-awaited Indian tender failed to improve sentiment, after Metals and Minerals Trading Corporation of India (MMTC) announced stricter terms that could delay payments to sellers.

MMTC will close an import tender on 7 May for an unspecified quantity of urea, for shipment by 15 June.

The company said it would try to open Letters of Credit (L/C), but if that was not possible, payment would be made on a cash on documents (CAD) basis. CAD is the less preferred route for sellers, as payments can be delayed by over a month.

Brazilian buying is only expected to emerge in June, and the US barge market shed $35/short ton during the week.

The near-term outlook for prices remains weak, but any change in production rates or a re-emergence of buying interest could see a turn in the market.

Prices in Europe have come under pressure, not only because supply is plentiful, but because demand has also eased. Dry weather across much of northwest Europe has also affected demand, although a spell of wet weather is now forecast. Nevertheless, sellers say farmers are more concerned about managing crops than supply or the price of fertilizers.

There is speculation and some discussion about price expectations for May and June, but current netbacks to Egypt do not reflect the levels currently talked about. Egypt is expected to give the market some direction once the result of Abu Qir’s tender, on Tuesday 5 May, is known.

Focus article by Erica Sesay with additional reporting from Julia Meehan