Urea paper markets rise on India tender rumours

Urea derivatives have reversed their downwards trajectory and moved back in line with physical prices today, driven by rumours that the Indian government may float a purchase tender next week.

Middle East urea swaps rose to $340-350/t fob basis bids and offers for July-August contracts, up from $325-335/t fob at the start of the week.

Chinese domestic urea futures also jumped later in the day, with the July contract up by as much as 1.82pc on the 20 June close, before settling up by 0.79pc at Yn2,160/t. The August contract was up by 2.19pc late in the afternoon trading session, before falling sharply to close up by 0.95pc at Yn2,130/t.

Rumours of a potential tender to buy in India, the largest global urea importer and second-largest consumption market, appear to be the key driver of the bullish sentiment in the paper markets, reversing the downwards trend throughout most of this week.

The tender's timing, if confirmed, would be contrary to most expectations, given that there is plenty of urea availability in India, with inventories climbing to more than 11mn t at the end of May, buoyed by strong domestic production. And the monsoon rains so far this season have lagged the long-term average by 17pc. But a tender issuance would imply that the government expects a potential surge in demand in July-September.

Urea prices at major fob origins jumped by 27-28pc from early May to mid-June, but the resumption of production in key supply-market Egypt, following a gas shortage, weighed on physical prices this week to 20 June, pressuring levels by $5-10/t in most markets.

By Harry Minihan