Israel-Iran Part 1
I was asked last week how the Israeli-Iranian conflict might affect fertiliser supply and trade routes. Before discussing fertilisers in general, I’d like to pause on the recent NFL urea tender in India.
Normally, NFL is rather slow when it comes to opening bids and announcing the L1 result. However, this time it took them just over 24 hours to issue a counter to all participants in the tender.
Had the Israeli-Iranian escalation not occurred right before the tender, I’d say the NFL urea tender was close to ideal: 2.5 million metric tonnes offered (including all possible double counters), 230,000 tonnes at L1, and - most importantly - a price of $399 per metric tonne CFR West Coast India. Let me say that again: if there had been no mutual bombing, producers would have celebrated the outcome, and a million tonnes would likely have been booked without hesitation.
But what actually happened?
Paper derivatives for July/August surged by double digits in key markets, including the Arab Gulf, NOLA, and Brazil. So, theoretically, producers are now facing a dilemma: either accept a fairly attractive Indian price and ship July volumes, or gamble on further Middle East escalation to push prices even higher. The answer would have been clearer if we weren’t in the middle of a historically quiet month, when not much typically happens.
My guess? We’ll see 500,000 to 600,000 tonnes confirmed, while those with the ability to wait and build stock will choose to do so.
Who’s in trouble?
India, which may need to re-tender at the end of July.
Ethiopia, which - boldly but perhaps mistakenly - decided to postpone its next tender until after 16 June.
Brazil, which will likely return to the market in 30–45 days for its main season.
On the supply side, I wouldn’t be surprised if Russian producers delay their planned summer maintenance, seizing the momentum. Meanwhile, those who secured Chinese urea will now be well-positioned, not just for Ethiopia and West Coast Mexico, but potentially for Brazil too.
Just reviewing my notes: derivatives saw triple-digit increases after the start of the Russia-Ukraine war. And we all remember what happened less than a month after the invasion - prices corrected down by the same triple digits. The market clearly overreacted, and I expect physical trading to enter a sort of limbo in the near term.
Take care, everyone—and I’ll try to analyse other fertilisers tomorrow.
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