Profercy World Nitrogen Index

Week 26 – Index falls with unplaced supply in the east, though rate of decline slows

The Profercy Nitrogen Index shed 4.75 points to 196.91 to remain at its lowest level since mid-January. The weekly change marks the narrowest decline since urea prices began to drop following the conclusion of the mid-April Indian inquiry, raising questions as to whether the market can finally find some support.

Some with awards under the latest 8 June National Fertilizers Limited (NFL) tender have been actively looking to source material for shipment to India by 20 July in the past week, easing some pressure on producers. At least two cargoes have already been nominated from Egypt, with reports of further business concluded in the low-$400s pt fob. 

Buyers in Latin America have also been more engaged with a round of sales to Brazil this week. The highest values represented a marginal increase on trading levels last week, with prices yet to fall below $400pt cfr. 

A moderate improvement in vessel transit through the Strait of Hormuz has seen urea cargoes stuck in the waterway for some time finally exiting the region. Most, if not all, of these cargoes are already promised to a market.

However, a handful of fresh vessels basis inventory or production have been nominated to NFL. While sourcing vessels is a challenge for buyers and operating rates in the region are largely below capacity with the exception of Iran, any uptick in fresh loadings would bring sizeable supply back to the market. 

Elsewhere in the east, minimum prices floors in China have effectively prevented large volumes being placed. Indian business is not officially permitted below $500pt fob, although a small number of cargoes have reportedly been lined up at lower values.

With export quotas to expire by 30 September, most of which have yet to be used up, concerns are building that China could adopt a more relaxed approach to export controls for August onwards shipment. This would have the effect of increasing competition for the next round of Indian business. 

While international urea values have fallen much closer to palatable levels in a move that has helped spur demand, there is still plenty of unsold supply in the east. Many are mindful that a catalyst is required to spur August business, with the poor monsoon and scale of recent purchases casting doubts as to the pace and scale of India’s next step into the market.