Chinese urea futures slide from record highs on new export measures

SHANGHAI (Reuters) - Chinese urea futures slid from record highs to hit a two-week low on Thursday, following a customs announcement requiring inspection certificates to ship fertilizer and related materials which is viewed as a de facto ban on fertilizer exports.

Urea futures on the Zhengzhou Commodity Exchange were last down 4.8% on Thursday at 2,970 yuan ($461.39) per tonne, and has lost 10% since the customs announcement was released on Wednesday.

Up over 70% this year, urea futures have surged on high coal prices and concerns over lower supplies amid a crackdown on high energy consuming projects.

China is the world’s largest phosphate exporter, shipping 4.75 million tonnes of diammonium phosphate fertiliser from January to August this year to buyers like India and Pakistan as well as 2.93 million tonnes of urea, according to customs data.

“This may bring significant impact to fertilizer exports, and it seems this is the first time the Chinese government is taking measures of export inspections to curb fertilizer exports,” said Gavin Ju, principal analyst for fertilizers at CRU Group.

“Traders are worried that customs will not issue the export inspection certificate. Without the certificate, they cannot export.”

Graphic: Zhengzhou urea futures fall after customs announcement:

Since mid-year, China has taken a flurry of measures to ease soaring fertilizer prices which raised concerns of food production. Its state planner launched investigations into the urea market and announced key fertilizer companies would temporarily suspend exports to assure domestic supplies.

It also announced it would release potash fertiliser reserves, while calling on state firms to provide sufficient power supply to fertiliser producers amid a nationwide power crunch.

Customs also released a statement on Wednesday announcing a list of 29 fertilizer products and fertilizer-making items that now require an inspection and quarantine report or certificate before it can be shipped out, effective Oct. 15.

“All these different measures taken by different government agencies indicate the export of fertilizers won’t be banned (outright), but halted or curbed significantly,” said Ju.

A report by CITIC Futures, linked to China’s largest brokerage CITIC, also said: “The news of the implementation of the urea export policy makes exports after October 15 very likely to be banned.”

But analysts say it will still take time for domestic urea stocks to build up before prices can ease. Prices of coal - used to produce about three quarters of China’s urea - are also still near record highs.

“This will ease supply tightness domestically while overseas supplies grow tight,” said an analyst who declined to be named. “But after the spring application season next year, maybe the export measures will be relaxed.”

($1 = 6.4371 Chinese yuan renminbi)

Reporting by Emily Chow in Shanghai, additional reporting by Beijing newsroom; Editing by Krishna Chandra Eluri