Hopes that the return of India to the global urea market would mean an upturn in prices were dashed after the results of the MMTC tender were made public. The lowest offer came from Global at $325/mt and $326.75/mt CFR. Sources estimate the netback to China on this offer to be $307-$309/mt FOB.
The publicly traded prices on Chinese product were last pegged in the $330s/mt FOB for granular and $320/mt FOB for prilled. Sources report, however, that late last week at least one unconfirmed deal was done for prills in the $310/mt FOB area.
Absent from the tender were any direct offers from Arab Gulf producers. Sources speculate the low price needed to be competitive in India dissuaded the producers from participating.
All told 2.09 million tons were presented in firm offers from 22 companies. An additional 700,000 were offered as optional tons.
Going into the tender, industry sources expected MMTC to take about 700,000 mt, maybe more if the price was right.
The Global price is about $10 less than what India paid in its last tender, Nov. 11, 2013, but still dramatically higher than the October 2013 price of $309-$315/mt CFR.
The Indian government is concerned about the price of imported urea because of the drain on the treasury both for the actual product and for the subsidies offered for urea. The higher the import price, the more the government has to pay to the importers in subsidies.
While India frets over higher prices, the Chinese are concerned about lower prices. Sources confirmed that some of the larger Chinese urea producers and major trading houses met this week to discuss prices. The end result, said one international trader is that the producers would try to hold firm on prices and lean on traders to not offer short sales into India. One industry watcher noted that the effort appears to have failed.
See the March 14 Green Markets web edition for more details.