All Posts from July 22, 2014

IPL urea tender confirms soft prill market

The India Potash Ltd. (IPL) tender closed July 21 with almost 4 million mt offered by 34 companies. The lowest price was $274.77/mt CFR from Liven for 120,000 mt. An additional 1.3 million mt was offered between $274.87/mt CFR and $275.99/mt CFR.

With roughly only a dollar difference, sources expect that many of the offering companies will meet the Liven number. Sources say a lot will depend on the discharge ports.

All told, IPL could end up with about 1.5 million mt from this tender. Sources had earlier speculated that if IPL could buy this much urea, additional purchases for this season may not be needed. If India steps out of the import market, observers say there will be little left to support prilled prices.

The sub-$276/mt CFR prices reflect a netback of $260-$262/mt FOB in China. This price indicates that the efforts by the Chinese Nitrogen Industry Association (CNIA) to artificially raise the price failed.

In the end, the eight lowest offers reflect prices slightly lower than predicted levels. Going into the tender, sources were estimating offers in the upper $270s/mt CFR. About 1 million mt were offered in the $277-$279/mt CFR range. Close to another 1 million mt were offered in the $280s/mt CFR, and 275,000 in the $290s/mt CFR.

While the Liven price is about $8/mt higher than what STC paid in its tender last month, STC was only able to buy 300,000-320,000 mt at the $266-$269/mt CFR level because few companies could match that low price. The bulk of the offers in that tender were in the $272-$274/mt CFR range.

Fearing the possible danger of another outlier with extremely low prices, IPL made it clear in the tender documents that they reserve the right to reject the lowest price. One trader noted that IPL has more flexibility than STC and MMTC in making this kind of decision.

The offers remain valid until July 25, so IPL will have to make its awards soon. Sources had expected IPL to move quickly anyway. The deadline for shipping is Sept. 7.

See a complete listing of the offers in the July 28 issue of Green Markets.

Iranian sanction relief extended

The U.S. and the rest of the so-called P5 +1 have extended the temporary exemption to sanctions against Iran through Nov. 30, 2014. The exemption allows the purchase of petrochemical products from Iran, including ammonia and urea. Despite the exemption, sources say few banks or insurance companies have been willing to support purchases of Iranian urea and ammonia.

The P5 +1 lifted the sanctions against the purchase or financing of Iranian urea and ammonia in January 2014 as part of the nuclear program negotiations. The renewal of the exemption came as the P5 +1 (China, France, Germany, Russia, the United Kingdom, and the U.S., with the European Union’s High Representative) extended talks with Iran to negotiate a comprehensive solution to ensure that Iran’s nuclear program will be peaceful.

Details of the U.S. Treasury Department rules can be found at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/jpoa_guidance_ext.pdf.