Urea: India Issues a New Round of Global Tenders!

According to Fertilizer News, on October 5th, India's IPL company issued a new round of global urea tenders with the deadline set for October 20th and shipment scheduled for December 10th. The extended shipping schedule might indicate that India aims to purchase more urea through this tender.

In recent years, due to restrictions from inspection policies, the ability of urea exports to absorb domestic supply has been greatly reduced. In 2022, China's urea export volume was 2.8313 million tons, accounting for only 5.02% of urea consumption. In the first half of 2023, the cumulative export volume was 1.005 million tons, showing improvement compared to the first half of 2022 but still declining by over 50% compared to normal years.

Looking at export profits, from the end of January to the end of July this year, China's FOB urea price has always been high internationally, making domestic urea exports uncompetitive. For example, in the first half of 2023, India tendered twice. Its east coast offers were 20-30 USD/ton lower than China's FOB prices. Although the final purchase volume was substantial, only 50,000 tons were from domestic participation.

In the second half of the year, on July 25th, India's IPL issued a new round of undefined granule urea import tenders. Bids were opened on August 9th, valid until August 18th, with the latest shipping date being September 26th. Once the tender news from India was announced, the urea spot prices strengthened, and future prices significantly rose, with multiple contracts hitting their upper limit.

From a seasonality perspective in agricultural fertilizer use, with the completion of corn topdressing, direct application demand for urea will enter its off-season. In the second half of the year, there's still demand for wheat base fertilizer from mid-September to mid-October, with the rest of the time mainly reserved for preparations for next year's spring planting.

Composite fertilizer companies didn't fare well in the first half of the year, and the current order situation for autumn fertilizer is unclear. This has made them cautious in raw material purchasing. Also, during the fall season, low-nitrogen, high-phosphorus fertilizer production can opt for cheaper nitrogen sources like ammonium chloride to replace urea.

China's urea industry plans to introduce an additional 4.76 million tons of production capacity in 2023. By then, the industry's total capacity will reach 79.22 million tons, with an annual growth rate of 6.39%. Since 2008, this growth rate is only surpassed by 2013 and 2009. Looking at the pace of capacity deployment, 1.3 million tons were already operational in the first half of the year, with 1.7 million planned for the third quarter and 1.76 million for the fourth quarter. Clearly, the pressure of new capacity in 2023 is mainly concentrated in the second half.

It is reported that two sets of device projects planned for the third quarter are steadily advancing in construction and equipment debugging. These products are highly likely to enter the market within the year, supporting domestic daily urea production to continue at a high year-on-year level.