Profercy World Nitrogen Index

Week 23 – Urea prices decline sharply as China briefly entertains Indian business

The Profercy Nitrogen Index has shed 40.33 points to 231.26, extending a decline that has now stripped more than 160 points – roughly 41% – from the 16 April high of 392.61.

In the urea market, the latest fall followed short-lived expectations that China would play a large role in meeting Indian demand.

Just weeks after the issuance of export quotas, the brief removal of minimum price floors led to a flood of offers from Chinese suppliers ahead of the National Fertilizers Limited (NFL) inquiry.

Yet, shortly after offers were submitted in that tender, authorities sought to curb perceived short selling, reinstating price controls at levels that are currently incompatible with Indian business. The damage, however, had been done, with the tender resetting urea values globally.

NFL's tender for a targeted 1.7m. tonnes remains in progress, with second-round counters issued on 12 June at $444.90–449.30pt cfr, in line with the L1 offer levels.

The state agency has 734,000t from those offering at the lowest levels, amid reports that a handful of additional cargoes have been confirmed.

Chinese offers and poor Indian netbacks have impacted values in the east, with long-haul values returning to the low-$400s pt fob Middle East and SE Asia, and small-volume shipments sold at levels reflecting the $470s pt fob China equivalent.

In the West, Russian suppliers have already shown interest in Indian business for prills despite returns falling to the high-$300s pt fob, while granular shipments are far less assured and likely dependent on market movements in Latin America, where netbacks are little better than $400–410pt fob.

North African producers are unlikely to support Indian sales, even though long-haul returns elsewhere are broadly in line with tender netbacks. Algerian cargoes are readily available in Brazil, though producers have also been making sales for Europe.

A round of short covering has seen as much as 60–70,000t of granular placed, with Egyptian producers concluding sales up to $495pt fob and Algerian business in the low-$500s pt fob, following far sharper European levels earlier in the week.

In Latin America, offers eroded quickly through the week, but some expect this could stimulate inquiry after a sustained period of illiquidity: offers in the mid-$400s pt cfr Brazil are gaining traction, while inquiry has surfaced in Central America and elsewhere.