Petrotahlil - International urea prices have firmed on trader-led buying with prices in the Persian Gulf, China, Black Sea and the Baltic increasing by $5/tonne.
The destinations of most of these cargoes are not confirmed but Pakistan, Africa and Australia are believed to be possible end markets.
Despite these price increase, the strength in the market is not yet convincing.
“Right now it feels a bit artificial. Taking positions right now is risky business where there is no demand. But in about four weeks’ time these people could be proven right when India tenders,” said a trader.
Discussions at the International Fertilizer Association conference in Montreal (10-13 June) may give more colour on the longevity of this uptrend.
Iranian supply in Brazil and the re-emergence of Chinese supply have kept prices subdued so far.
This week saw Chinese levels above $280/tonne FOB (Free on Board) from mid-$270s/tonne FOB as producers’ inventory levels fell after recent sales.
A tender in Sri Lanka netted back to below $270/tonne FOB China but this is believed to be a short position.
As for Iran, exports into Brazil and Turkey continue with the US delaying the announcement of new and tougher regulations for Iran’s petrochemicals sector including urea.
Producers have also resorted to supply management with Egypt shipping 90,000 tonnes to Brazil in a bid to keep prices in its other markets at a premium.
Some pick-up in demand has been seen recently in central/Latin America and Australia.
India too is expected to return with an import tender for around 500,000-700,000 tonnes in second half of June.
“Things are looking positive for the market but it will all depend on India,” said an international trader.
The main issue with the market is the disparity in producer and end user ideas.
“On the back of India, the Persian Gulf rallied to $280/tonne FOB and now $285/tonne. But Brazil is not able to digest $285/tonne CFR. Buyers in Brazil have a new big leverage in negotiations because of Iran,” said another trader.
Europe is not in season, with the only business heard likely to be short covering, while the US continues to battle weather issues.
The next few weeks will be critical for the market as they would determine which way prices are headed.
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