Urea market breaks two-and-a-half-month price rally

LONDON (ICIS)–The urea market price rally has run out of steam after two-and-a-half months, as China is back in the export market. Global prices softened for the first time since early June, after a run up of 20-30%.

• Chinese exports increase
• Import markets inactive, except India
• MMTC closing another tender on 26 August

Producers’ netbacks are also lower because of freight rates increasing for several destinations, including Brazil.

Sentiment turned, as China is expected to export 800,000 tonnes to India in September. It is likely to supply 400,000 tonnes each for the RCF and MMTC tenders.

“China exported more than they were expected to.  We also don’t know when the domestic market [in China] will resume,” said a trader.

Domestic prices in China are significantly below international levels, and factories are now exporting more.

It is also not clear when the domestic market will resume in China. Farming conditions are not conducive, with many farms being flooded and temperatures being too hot.

Ports in China are congested, with some cargoes not expected to ship in time for India.

Indian demand remains strong, with another tender, closing on 26 August, for a tight shipment schedule of 5 October.

Import demand from all other markets is missing. Prices in Brazil have declined for the first time since July, while Nola shed $10/short ton over a day.

There are some expectations that prices offered in the next Indian tender may be $10/tonne lower.

Some traders may also need to liquidate cargoes, but it is also clear that India is short of urea, and needs to buy at least another 4m tonnes over the next five months.

The overall outlook is still stable on bullish Indian demand forecasts. Any correction may be temporary if buyers in Brazil and other markets rush in to cover.

Focus article by Deepika Thapliyal