The MMTC urea tender closed June 3 with offered prices significantly lower than the April IPL tender and tons offered significantly higher.
The influence of the opening of the Chinese export season beginning July 1, combined with Iran and the CIS looking for buyers pushed down prices. The lower prices and higher tonnage confirmed industry views that the global urea market has too many tons chasing too few buyers.
The average price from the 31 offering companies came in at $343.73/mt CFR compared the April average of $390.73/mt CFR.
The lowest offer came from Swiss Singapore at $331.50/mt CFR.
The lowest – and winning — offer in April was $379.70/mt CFR. In April the offers totaled 1.9 million mt. This time the total is 4.3 million. Last time IPL only bought about 500,000 mt. Sources at the time said the buyer was taking just what they needed in anticipation of softer prices for the next tender.
Before MMTC closed its tender, traders speculated that if the price was right – some mentioned $330/mt CFR – MMTC might take close to 1.5 million mt.
A change in the rules of the tender regarding Iranian tons could limit what MMTC buys. Late in the game MMTC required that companies offering Iranian tons provide their own insurance. MMTC would cover the insurance for tonnage from any other source.
Sources say the Swiss Singapore low price could reflect Iranian tons because they are specifying delivery to the West Coast port of Mundra. Offers to the East Coast ports are about $3/mt more and could easily reflect Chinese material.
More than 1.5 million mt are reportedly already in the Chinese bonded warehouses, following a dismal domestic season for urea producers. Sources reported last week that traders were already lining up vessels for late-June loadings in Chinese ports. The idea was to have the ships ready to go as soon as the export duty drops July 1.