Chinese N association calls for ban on low-cost urea sales – Alert
The China Nitrogen Fertilizer Industry Association (CNFIA) on Oct. 10 called on urea producers to refuse to back the current offers in the MMTC/India urea tender for the next three months. The association said the lowest offered prices are below domestic costs and could bring about international sanctions.
The association does not have the power to block producers from backing traders who receive awards from MMTC. In its statement, however, the CNFIA called on producers to keep an eye on each other to make sure no one violates the recommendation. The statement further said that any company not adhering to the recommendation could be "severely punished in accordance with the relevant provisions…relating to nitrogenous fertilizer self-regulation."
The netback on the MMTC tender is pegged at $245-$249/mt FOB. International traders speculate that the average break-even price for production is still at least another $20/mt lower. Some older production plants will not be able to meet the India price, sources said, but the newer, more efficient facilities should be able to do so. Sources say the break-even price keeps falling because input prices are also falling, with international traders pointing to the continuing drop in coal and petroleum prices.
This latest call by the CNFIA recalls a similar action in June 2014 when Chinese producers withheld their product after holding the line at $260/mt FOB, causing chaos in the international urea community. Some traders accepted the $10-$12/mt loss at that time, while others backed out of the deal, putting them on a blacklist by the Indian government.