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The printing marks have been applied; how much will urea increase? We’ll find out on the 9th Author/Source: China Fertilizer Network Date: 2020-10-09 Clicks: 24 The long-awaited tender has finally arrived. On the evening of September 30, India announced a new tender for urea purchases; the bidding deadline was set for October 9, with shipment scheduled for November 16. The valid period for submitting bids was until October 19. It has been over a month since the last tender on August 18, so indeed a long period of time has passed. This indicates several things: first, India has already obtained an ample supply of urea through the previous four tenders; second, Indian ports are congested; third, India has limited financial budgets. This new tender is also the result of the new policies mentioned in the earlier analysis articles published by Zhongfei Net (on the evening of September 29, India’s Ministry of Fertilizers announced that the restrictions on subsidies for fertilizers during the period from October to December 2020 would be lifted, thereby facilitating the sales and import of fertilizers). Usually, there is a limit on monthly expenses, but this has been removed). Fourthly, India is indeed waiting for the international urea market to cool down before launching new procurement bids. Taking the Middle East as an example, the offshore price of urea in countries such as Egypt has dropped from around 270$ at its peak in August to around 250$ this week. Although it has not fallen to around 235$ as in June, there is still a demand gap in India’s urea market, so now is a good time to make purchases. China, as the main supplier, is in the final stage of supplying fertilizers for the autumn season. Urine prices in China have once again dropped to relatively low levels, and congestion at Chinese ports has been largely alleviated. The three ships carrying urea mentioned in the previous tender were intended for India, and thanks to the shipping time of about a month, the supply of urea from China remains stable. Let’s take another look at the speculation regarding prices in this tender: it is highly likely that the prices in this tender will remain relatively unchanged from the current levels, or might even be slightly lower. The shipping time can explain this – with a shipping period of around one month, if the price is high, India can order less and hold another tender later; if the price is low, India can order more goods, and thus will be less eager to conduct another procurement tender. Assuming the new price for exporting to India is around $255 per ton for Chinese urea on an FOB basis, the price for Chinese urea manufacturers to deliver it to ports such as Yantai Port would be approximately 1,684 yuan per ton (price per ton bag). Depending on the shipping costs, this represents a favorable ex-factory price. Given that the only supports for Chinese urea prices are limited stockpiles and possible production cuts, it is likely that China will supply large quantities of urea to India ； Considering the potential shortage of natural gas in China due to weather warnings that could affect urea supply in the future, and the fact that several urea manufacturers in Jincheng, Shanxi, are scheduled to suspend production starting in November as a result of environmental regulations, the listed prices might be higher than the estimates mentioned above. On the 9th, we will see what the total amount of bids submitted by India is; it is likely to be over 2 million tons, which indicates that urea in regions such as the Middle East faces similar sales pressures as urea in China. As for the lowest bid prices, if competition is fierce, the ex-ship price of Chinese urea could drop below $250. Additionally, around October 20th, the daily production of urea is expected to return to around 165,000 tons, which will lead to a steady decline in the prices of urea in our country. However, if the total bidding volume remains around 1-1.5 million tons, it indicates that urea suppliers from the Middle East and China will continue with the strategy adopted in previous bidding rounds, refusing to compromise on prices until India agrees. Optimistically, the offshore price of urea in China could be around $260, which would result in a price increase of over 50 yuan for urea in our country. In summary, given that this pricing decision was made after careful consideration by India and that the sellers will also approach the situation cautiously, international urea prices have been stuck at a low level for a month now. In the short term, there is a clear trend of an increase in China’s urea supply (at least three urea plants have resumed production during the holidays). In a few days, some urea manufacturers will start to resume the transportation of urea by road, and it is likely that there will be a slight price increase; however, no major fluctuations are expected for now. (Cheyan Hong)