Friday’s Insider: The Conflict Aftermath

It was a very turbulent 12 days, during which fertiliser prices followed a rollercoaster trajectory. A bit of Israeli-Iranian conflict aftermath. It seems to me that we are back to where we were before July 13:

• Iran is back with production.
• Egypt is about to restart, but is initially supplying the local market.
• India is tendering, but now for 2 million tonnes instead of 1.5 million tonnes.
• Dangote is calling for a tender, but for three cargoes instead of two.

What is different? To me, the most important point is that demand is clearly present: India, as mentioned above; Australia is chasing tonnes (which explains why Pupuk’s tender was well oversubscribed); and Brazil is now two weeks closer to the big season.

Okay, but what about the prices? After yesterday’s sharp correction, we’re starting to see some activity return to the market. Business in Brazil was reported at $430-440 pmt CFR. Mind you, it was $30 pmt lower prior to the war. It looks like prices may have found a new support level—and that’s why I expect Dangote to break the $410 pmt FOB level.

And some India pre-tender analysis. There’s still more than a week to go before the next Indian urea tender, but let’s try to start solving this equation.

Input: 2 million tonnes of urea, equally split between coasts, to be shipped within 35–45 days.

Question: Estimated quantity to be procured and the likely L1 price?

I would start solving this by looking at the total quantity first.

• AG (Arab Gulf): 500,000 metric tonnes. Alternatives include Australia, though it faces competition from Southeast Asian producers. Brazil is active on a formula basis – yes, but there are still tonnes left. India is a quick and efficient outlet.
• Russia: 250,000–300,000 metric tonnes, especially for prilled urea producers. Nothing was shipped for the last tender, so these tonnes should potentially be available, although a couple of cargoes have already found homes in Latin America.
• Algeria: 100,000 metric tonnes. Europe remains a more attractive outlet, but there’s always a chance.
• Nigeria: 100,000 metric tonnes between the two producers, provided Brazil doesn’t start buying aggressively.
• Southeast Asia: 150,000 metric tonnes – if the Australian season has finished by that time.

I do not expect Egypt to participate.

This gives us a total of roughly 1.1–1.15 million metric tonnes — still well below the requested 2 million tonnes.

Now the price. If we roughly calculate today’s reported AG prices, add freight and traders’ margins, India would have to pay well above $500 per metric tonne (play big!). But India is always India — and Indian tender prices often do not reflect the rest of the world’s market levels; they are valid for that particular moment and tender only. Is this tender needed for the market? Absolutely. Will the price be cheap? Definitely not. Early calculations suggest that $450–460 per metric tonne would be a fair number — one that producers and traders can accept.

However, it’s worth reviewing again next week, closer to the tender date, once more market developments come into play.

————

About the Author of “Friday’s Insider”: Ilya Motorygin is the co-founder of GG-Trading and brings 30 years of experience to the fertilizer industry. Renowned for his comprehensive problem-solving skills, Ilya expertly manages deals from inception to completion, overseeing aspects such as financing, supply chains, and logistics.