Indian Agencies Cash In On Slump In Global Urea Prices

International urea prices crashed to their lowest levels last week in nearly a decade, touching $82 per tonne FOB (free on board). However, most analysts feel that urea prices have bottomed out.

The decline in urea prices started in April. In June, the price tumbled to around $109 mainly due to absence of any imports from China, the largest buyer in the world market. With China staying away from the market for a much longer time than expected on account of surplus stock, the downward trend has been maintained.

The prices are unlikely to fall further, a market analyst said indicating that the trend was a temporary phenomenon, a view shared by the National Planning Commission report. According to the report, though at present, supply outstrips demand, urea prices are not expected to decline any further. According to the report, the world surplus of urea, which was as high as 1.46 million tonnes in 1995 will decline to 1.31 million tonnes by 1999. Keeping in view the reducing surplus, international prices of urea are not expected to soften, and may in fact, escalate further during the Ninth Plan.

 

Cashing in on the declining trend, three major Indian agencies State Trading Corporation, MMTC and Indian Potash Ltd picked up a total of over 0.5 million tonnes of urea during the last one week at prices ranging between $82.50 to $95 per tonne.

Inspite of the low urea prices prevailing in June, Indian importers stayed away from the market due to uncertain prospects of a good monsoon. Since then, a good monsoon has egged the agencies to enter the market. According to the Meteorological Department, 29 of the 35 meteorological sub-divisions covering two-thirds of all the districts in the country, received normal to excess rainfall. Till August, Indian agencies had contracted around 2 million tonnes of urea. The country expects to contract a total of 3.4 million tonnes of urea this year.