India will not guarantee payments for Iranian urea in upcoming tender

• Urea values advance as India returns to the market
• MMTC India will not guarantee payments to sanctioned countries, raising doubts over Iran's ability to supply
• Middle East spot prices now over $320pt fob

The much-anticipated Indian urea purchasing tender was announced late last week, providing further support to global urea values. The tender closes 5 October with shipment required by 19 November, five days before US sanctions against Iran come into effect. With US sanctions curtailing shipments of Iranian material to Europe, Latin America and elsewhere in the past six months, Iranian suppliers have been increasingly willing to commit large volumes to India through recent tenders.

However, the latest tender documentation contains a new clause, one which may shut out the possibility of Iranian sales and end the long running debate within the market around Iran’s continued ability to export to India. The new clause does not ban Iranian imports of urea outright but overtly states that the tendering agency (MMTC) will not guarantee payments.

It reads:

“MMTC cannot guarantee payments in respect of goods offered from sanctioned countries. MMTC shall neither be liable nor be responsible for consequential damages and costs incurred by supplier/bidder in case of such goods.”

One thing is clear that, without Iranian material, India will face far higher offer levels. With shipments from China to India waning in recent years, India has become increasingly reliant on Iranian urea. The 1 August urea purchasing tender saw Iran commit over 700,000t.

Indeed, urea markets rallied in the immediate aftermath of the Indian tender announcement with Middle East spot prices now over $320pt fob and Egyptian granular urea prices advancing $10pt in just one day.

It will now be down to Iranian producers and intermediaries to decide whether they intend to participate. Iranian producers have been selling forward as aggressively as possible over the last few weeks (and ahead of the imposition of the sanctions). As reported previously, Iranian fob prices have been as much as $70pt or more below fob prices for other producers in the Middle East.

With urea prices already at multi-year highs, the market will no doubt focused on the outcome of the 5 October tender.

By Michael Samueli.

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