Friday’s Insider: Why the market should stop waiting for urea import tenders

The Indian urea market is undergoing a significant transformation. Historically dependent on imports to meet its vast agricultural demand, India is steadily moving towards self-sufficiency in urea production. As the market evolves, the dynamics of urea import tenders are changing, leading to a reduced influence on global urea prices. Here’s why the market should stop waiting for Indian urea import tenders.

India’s annual urea consumption stands at a staggering 35 million metric tonnes. However, recent years have witnessed a substantial increase in local production. In 2024, India’s domestic urea production rose to 31 million metric tonnes. This is a marked improvement from previous years, when the country had to rely heavily on imports to bridge the supply gap.

For context, India imported approximately 7.5 million metric tonnes of urea in 2023, a significant drop from the 9.1 million metric tonnes imported in 2022. This trend of decreasing imports clearly indicates a move towards greater self-reliance, with the potential to further reduce import volumes in the coming years.

Indian urea import tenders have become a concentrated arena dominated by producers from three central regions: Russia, the Arab (Persian) Gulf, and China.

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Russia: Russia remains a significant player, producing nearly 4 million metric tonnes of prilled urea annually. Russian producers have been a consistent source for India’s urea imports due to their substantial production capacity and world’s lesser demand for prilled urea particularly.

Arab (Persian) Gulf: Producers in the Arab Gulf benefit from geographical proximity to India, making them a logistically favorable option. The region’s strategic location ensures that Gulf producers are key participants in Indian tenders.

China: Chinese suppliers participate in the tenders when they have government permission to export. China’s vast production capacity makes it a crucial player, albeit dependent on regulatory approvals for export.

With the participation mainly limited to these regions, the competitive dynamics of Indian tenders are becoming increasingly predictable and region-specific.

As India’s reliance on imports diminishes, the influence of Indian urea import prices on the global market is waning. The reduction in import quantities means that the prices set during Indian tenders have less impact on the broader spot market. The tenders are becoming isolated events with prices that are pertinent only within the tender context and not reflective of the overall market conditions.

India’s goal of achieving urea self-sufficiency by 2025 is ambitious, and there are valid concerns about whether this target will be met. However, the trajectory is clear: India is reducing its dependency on imported urea. Until self-sufficiency is achieved, the import tenders will likely remain a transactional affair between Indian buyers and producers from Russia, the Arab Gulf, and China.

That’s why, in my opinion, the global urea market should adjust its expectations and strategies accordingly. Waiting for Indian import tenders as a barometer for urea prices is becoming increasingly irrelevant. Market participants need to look beyond India’s tender prices and focus on broader supply and demand factors. India’s shift towards self-sufficiency marks a pivotal change, reducing the country’s impact on global urea pricing and signaling a new era for the international fertilizer market.

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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.