Central Florida: Sellers in the Central Florida phosphate market, already experiencing light demand due to the usual August downturn, are facing an added roadblock in the form of rail delays.
A massive influx of grain shipments has reportedly caused a nationwide railcar jam ahead of the September buying window. Some 2,700 railcars were reportedly running an average of 17 days late to their respective destinations in mid-August. Shipping operators hoped to reduce that number to below 2,000 by mid-September.
Though the delays were undoubtedly gumming up logistics, the situation was minor compared to 2014’s early April peak, when close to 16,500 railcar orders were averaging delays of several weeks.
Despite the delays, phosphate sellers said railcars were still currently able to be booked out of Florida. Sources quoted the DAP market at $435-$440/st FOB, unchanged from the previous week. MAP, still said to be essentially unavailable, was $20/st higher than DAP.
U.S. Gulf: The NOLA barge market continued to be described as “firm but flat,” with few confirmed prompt transactions reported.
With Chinese vessels still a few weeks from discharge, domestic producer offers in the $455-$465/st FOB range for September and October were the only game in town. Traders expressed doubt that any tons had moved at those levels, but also believed there was little interest to try and short-sale the market.
At least one October DAP transaction was confirmed at a price of $455/st FOB.
Industry players cited a number of factors for the market’s lack of mobility. First, “everyone’s bought what they need to get started,” one source said, adding that the market is simply going through a seasonal soft patch.
Another more nebulous difficulty was the increasingly muddled logistics landscape. One source noted that at the Southwestern Fertilizer Conference in July there was “this sudden realization there were going to be problems on freight. And now here we are.”
In addition to barge shortages and river freight costs quoted anywhere from normal to three times the average rate, rail operators reported a spike in delayed railcars. Grain shipments were thought to be the primary culprit, though greater-than-average demand for coal and oil freight also contributed to the backlog.
Although rail operators hope to bring the number of delayed cars down by mid-September, some sources were less optimistic, predicting significant backlogs until the end of December or even into spring 2015.
The logistics problems impacted the market from a number of angles, sources said. Unpredictable barge rates had the effect of clouding net price levels for river transactions, as prices quoted in FOB often failed to accurately depict net costs to buyers who risked ending up paying a small fortune in shipping. Buyers were said to seek both FOB and DEL price quotes in weighing purchases so as to more clearly suss out accurate net prices.
For example, traders spoke of a DAP barge offered near Mile 800 on the upper Mississippi for $440/st FOB, seemingly at a significant discount to the market. The hidden cost, however, lay in the freight rates offered with the cargo, quoted at $30/st to St. Paul, Minn., a destination generally commanding closer to $17.50/st.
The freight uncertainty was reportedly slowing terminal operators’ abilities to refill their bins, and supply was growing increasingly tight throughout much of the country as a result. The warehouse tightness was compounded by a reluctance from some buyers to purchase rail-loaded cargoes for fear of potential delivery delays, which in turn was thought to reduce traders’ motivation to go long on a barge. “It’s a vicious cycle,” one source said.
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