AMMONIA
U.S. Gulf/Tampa: While the Tampa price still lingers at the $745/mt DEL level, sellers say those numbers will not be around for September. They cite new business at other U.S. Gulf ports within the past week or so that occurred within the $825-$925/mt DEL range. Sources attributed the $825/mt to a Trammo sales to Ineos, with the higher deal done late this past week by PCS to Terra. Citing Yuzhnyy prices of $800-$825/mt and Arab Gulf at $800/mt FOB, sellers say Tampa is poised to go as high as $900-$950/mt DEL for September.
Much of the run-up is attributed to the Burrup outage in Australia, as well as turnarounds in the FSU. Sellers surmise that higher prices may prevail until sometime near the end of the year, when a new unit in Egypt comes online and the Australian plants return to service, as well as the completion of turnarounds in the Ukraine and Russia. In the meantime, demand will remain steady and supplies short.
U.S. anhydrous ammonia imports were up 4 percent in the fertilizer year July 2007-June 2008, according to the Department of Commerce. The year ending in June saw imports of 8.7 million st, up from the prior year’s 8.36 million st. June imports, however, were off 13 percent, to 767,836 st from the year-ago 886,530 st.
Eastern Cornbelt: The market for anhydrous ammonia was quiet last week, with prices $1,040-$1,100/st FOB.
Western Cornbelt: Spot anhydrous ammonia pricing was reported at $1,040-$1,100/st FOB.
Southern Plains: The anhydrous ammonia market was pegged at $940-$975/st FOB for cash market tons in the region, with the low out of production points and the upper end FOB pipeline terminals.
Black Sea: Even though the turnarounds in the area are now ending and more than 2 million mt of annual production is back online, sources say prices continue to remain firm. Global demand remains strong enough to absorb the new tons that are becoming available as the plants get back to full production.
Helping the Yuzhnyy producers, especially with Asian buyers, are reports the Burrup/Australia plant will remain down into October. Countries that had come to depend on the Burrup plant are now looking for material from whatever source makes itself available. For many, that means the Black Sea.
Even with a bullish market, some in Asia say the peak in pricing may have been reached. They base their view not so much on the basics of supply and demand, but rather a growing push-back from buyers. What started as some industries in Asia reacting to almost daily increases in ammonia prices has now spread across the globe. Industrial buyers of ammonia have joined with the fertilizer sectors to complain about ever-rising prices.
Even with complaints from producers, sources say additional bumps in the price are expected. Last week, however, despite all the talk of stronger prices, sources could not point to any new business that indicated an increase. At the same time, one trader noted, nothing popped up to indicate a softening, either. Reports of sub-$800/mt FOB deals circulated in Asia late last week, but sources could not confirm the deals actually took place.
While not directly affecting the loading ports or main shipping lanes, sources report the fighting between Russia and Georgia has added an element of unease in looking at the region.
Middle East: Producers are looking forward to increased business in an already tight market.
Indian fertilizer firms settled their talks for phos acid with the North Africans last week at $2,310/mt CFR P2O5 basis. That means that through September the DAP producers will be looking for more ammonia.
Until the talks were concluded, Indian buyers were taking only what their contracts required. Occasionally they would ask for a few extra tons in a shipment, but by and large they took only what was required of them – and no more.
Fortunately for the producers, the market for ammonia was so tight – strong global demand, turnarounds in Yuzhnyy, and the shutdown of the Burrup/Australia facility – they were not worried about keeping prices up.
Sources report the producers were able to stick with their game plan of keeping the reserve tanks as empty as possible to prevent any downward pressure on prices.
The last bit of public business showed a spot price in the low-$800s/mt FOB. Sources say many of the tons that were shipped under the contracts have significantly lower netbacks.
Producers hope that with business to pick up in India, new and higher levels of public business could move the listed price up more.
One indicator of where the Middle East price might be going could come from the Iranian selling tender. Sources say the final award will give an indication, but not a firm solution to the problem of setting a new floor or ceiling.
In general, said one trader, Iranian tons cost more. There are frequently delays at the loading port, and there have been too many episodes of ships waiting for cargo. Plus, the additional steaming time to one of the Gulf’s northern most ports adds to the price.
Bidders in any Iranian tender take all these items under consideration. At the same time, buyers of material from the Arab countries also look at the price from Iran and make appropriate deductions in prices. The gap between the Iranian FOB price and the price from an Arab supplier has been as low as $5/mt and as high as $20/mt.
For now, until a new bit of public business is concluded, sources say the area price remains at $800-$810/mt FOB, with plenty of room to grow.
Asia: Sources report more Japanese buyers are looking to the international market for product. Observers note that many of the Japanese ammonia producers have either shut down or curtailed activities. Reportedly, the plants most directly affected are the older facilities that are not as cost-efficient as newer offshore plants. The growing demand for imported ammonia began a few years ago, when government inspectors found a number of ammonia producers in violation of health and safety and environmental regulations. Some of the plants were able to make the necessary changes to come back online. Others, however, never reopened. The gap in domestic production had to be filled by imports.
With no new facilities coming online and demand steadily growing, industrial users in Japan have had to turn to international traders to secure the tonnage needed to keep the plants running.
As the international price moves up, the end users were passing on their costs to their customers. Now, say sources, the industrial users of ammonia are finding it harder to pass on their higher production costs.
A growing concern that a global recession may soon occur is driving many industrial buyers to push back on pricing increases.
The price pushback is not limited to Japan.
Taiwanese and South Korean buyers have also started to limit their purchases unless the price of ammonia comes down.
So far, said one trader, all the buyers have been able to do is slow the rate of increase. As long as demand remains strong and supplies limited, he said, the price will keep going up.
UREA
U.S. Gulf: There hasn’t been a lot of activity during the past week, and a vessel was due into New Orleans on Aug. 15. Early last week, a barge sale was reportedly made at $765/st FOB. However, by the end of the week, others were calling new trades at $775-$780/st FOB.
Urea imports were up 5 percent for the fertilizer year ending June 30, to 6.55 million st from the prior year’s 6.22 million st. However, urea imports were off 13 percent for June, to 211,209 st from the year-ago 252,721 st.
Eastern Cornbelt: Granular urea slipped just slightly to $850-$890/st FOB to dealers.
Western Cornbelt: The granular urea market was quoted at $850-$890/st FOB regional terminals to the dealer.
South Central: The granular urea market was quoted at $820-$850/st FOB regional warehouses, but sources said prices during the past week were moving down, at least on a temporary basis.
India: Industry sources keep looking at India and trying to figure out what the buying agents are going to do. Estimates on how many more tons India will need to buy before March 2009 vary from 750,000 mt to 2 million.
What is clear to the industry, however, is that India will have to buy before the year is out. Sources say if the buyers can hold off for another couple of months – late September at the earliest – the price from Yuzhnyy could come off enough to avoid major spikes in the price.
Last week the Indian government announced a plan to quickly get old plants refitted and operating within a couple of years. At the same time, the government approved a new subsidy plan that will encourage more domestic production.
According to the government’s website and local media reports, the government will provide producers a guarantee of 85-95 percent of the imported parity price within a price range of $250-$425/mt.
The idea behind the plan is to move India closer to self-sufficiency in urea by 2012 by upgrading existing and shuttered plants.
The Fertilizer Association of India supports the idea, but warned that all the overhauling of plants means shifting from naphtha and coal to natural gas. The FAI said there is already a shortage of available natural gas for existing plants. Adding more capacity could put a severe strain on the natural gas supplies. The FAI also said that the price of gas needs to remain below $5/mmbtu for the plan to be viable.
In 1980-81 farmers paid about 94 percent of the cost of the urea they used. Last year they paid only 27 percent. And the fiscal year that ends March 2009 will show an even smaller contribution by farmers to the cost of urea.
The dramatic rise in payments by the government in subsidies is because increasing international prices have hit the budget planners hard.
The government had put aside about $733 billion for subsidies. That amount was gone before the first semester passed. A supplement to the subsidy budget is sitting before parliament and should be passed soon. In the end, an additional $28 billion is being planned for subsidy payments.
The government wants to increase urea production by 3 million mt in two years. Industry sources outside India say a more realistic plan is four to five years.
In the meantime, India still needs tonnage this year.
So far, say sources, buyers from STC, IPL, and MMTC have been remarkably quiet. Rumors of quiet talks quickly evaporate for lack of support.
If India can hold off a couple more months, say sources, they might be able to keep the downward pressure on the Yuzhnyy market, which could have a spill-over effect on the Arab Gulf. Sources say the buyers – and the government’s treasurer – have a deep fear of facing prices higher than $900/mt CFR.
One trader noted that the recent Bangladesh tender already came in at $920-$930/mt FOB, so the Indians may have to make their peace with near prices in that neighborhood.
What India has going for itself, however, is the quantity of urea it needs. Sources say it might be able to keep the price below $900/mt CFR with guarantees of large purchases.
Sources say a lot will depend on the final outcome of what China does with its export duty. Buyers in India seem resigned to not being able to take cheap Chinese urea any time soon. But, said one trader, they can always hope.
China: Industry watchers seem convinced that this week we will see an announcement from Beijing about the fourth quarter export duty. The latest report is that the duty will be anchored at 150 percent for the entire fourth quarter. Some variations of the story say the higher duty will take effect immediately after the government makes its announcement.
Even with a softening of the export price to $805/mt FOB, sources say Chinese tons are not competitive into India.
Middle East: Now that $870/mt FOB has been achieved for granular, sources say it is time for the price to start easing down. They add that producers who would not even entertain the notion of a phone call unless the buyer started bidding at $870/mt FOB are now taking meetings with a starting price of $850/mt FOB. Reports are even circulating that a deal was done at that lower level late last week.
Traders and buyers are now wondering if the dip in price is a trend or aberration. Indian buyers in particular are hoping for the former over the latter.
Asian sources say the slip in prices in granular is being reflected in major granular markets. Asian traders point to a softening in prices at NOLA as more evidence that the Middle East price has peaked.
Prills from the area, however, remain another story.
Producers are reportedly so comfortable they won’t take calls or meetings to discuss prill orders. Even buyers just asking for pricing guidance are dismissed. The attitude seems to be that because they are sold out of prills, the producers feel under no requirement to offer a price.
One observer noted that this attitude could mean the producers really are sold out.
Past experience with many of the manufacturers has led buyers to believe that if the right price is bid, a cargo can be found. The results of casual talks over the past two weeks seem to indicate the producers are in fact sold out, with no tons available at any price.
With the slip in granular pricing, sources now say the high end of the market has dropped to $850/mt FOB and prills remain motionless.
Black Sea: Sources are reporting a softening in attitude and rumors of softer prices. Swaps are reportedly taking place in the $775/mt FOB range, but industry observers say those deals most likely represent swaps of positions taken some time ago.
Confirmation of new deals last week was difficult. Sources say deals are still being done at $800/mt FOB, but no one was naming names.
Some Asian traders marveled at how the price in the Black Sea seems to be dropping at a time when Indian buying looms on the horizon.
One trader noted that a number of companies that took positions in the hopes of selling to India are now finding the producers burning up the phone lines asking them to take delivery on their tons. This pressure, said one trader, might be the reason the swap market seems to have kicked into high gear.
Asian observers note that if India can hold off buying the rest of its requirements for another couple of months, the price out of Yuzhnyy might fall enough to make the Indian bean counters happy for once.
For now, sources peg the market at $790-$800/mt FOB, and no one knows which way the wind is blowing.
Bangladesh: BCIC awarded its tender at prices that made their Indian counterparts shudder. Reportedly, the final awards came in at $920-$930/mt CFR bagged. Even taking off $10/mt for the bags and another $10-$20/mt for shipping time differences, the end result of an equivalent deal into India takes the final number much too close to $900/mt FOB for the Indians’ liking.
Asian observers are waiting to see exactly how many tons BCIC actually takes. In the past, the buying company has awarded tenders and then not followed through. At the same time, it has made awards to companies without firm backing from producers. Sources say this may be the situation with a couple of the winners. Reportedly, some discrete inquiries were made following the BCIC announcement.
Pakistan: Fed up with allegations of price gouging by distributors, the government of Pakistan ordered urea producers to turn over 50 percent of their production to government warehouses. The other half may be sent to dealers who have not been accused of price gouging or hoarding. The government also announced that the first half of the 300,000 mt promised by Saudi Arabia will be delivered by the end of August. The remaining 150,000 mt is slated to arrive by mid-September.
Vietnam: Small shipments of 5-7,000 mt continue to flow out of Vietnam for nearby ports. Sources speculate that many of these tons are being gathered in bonded warehouses in other countries in an effort to build a sufficiently large enough cargo to offer to India or Bangladesh.
Observers say the current price is just low enough that with the current softening of freight rates, a deal might be done into either country.
The shipments are possible because of confusion over the interpretation of government edicts on the imposition of export duties.
NITROGEN SOLUTIONS
U.S. Gulf: Prices for nitrogen solutions were relatively steady last week as activity tended to fall, but the top of the price range dropped $5/st FOB to $510/st FOB from $515/st FOB the previous week, with the low at $500/st FOB ($15.65-$15.94/unit.) That reflected the sluggish market.
UAN imports were up 44 percent in the fertilizer year ending June 30, to 3.49 million st from the prior year’s 2.42 million st. Imports were off 6 percent in June, to 222,706 st from the year-ago 237,184 st.
Eastern Cornbelt: UAN was quoted at $15.78-$16.41/unit FOB regional terminals last week.
Western Cornbelt: The UAN-32 market continued at $15.63-$16.41/unit.
Southeast: The UAN market continued moving up from last report. Sources quoted the terminal market at $15.78-$16.09/unit FOB. Reference levels were quoted as high as $515/st ($16.09/unit) FOB last week, though new, prompt business was very slow.
South Central: UAN-32 pricing continued moving up since the last report, with the regional market quoted in a wide range at $520-$530/st ($16.25-$16.56/unit) FOB terminals to the dealer.
Southern Plains: The UAN-32 market was quoted in a range of $15.78-$15.94/unit FOB.
AMMONIUM NITRATE
U.S. Gulf: Most were putting the NOLA ammonium nitrate price in the $510-$520/st FOB range last week, with some sellers eyeing $560-$570/st FOB.
AN imports were off 8 percent in the fertilizer year ending June 30, to 1 million st from the year-ago 1.09 million st. They were off 16 percent in June, to 33,728 st from the year-ago 40,225 st.
Western Cornbelt: Ammonium nitrate pricing was unchanged, with sources quoting the regional market at $550-$600/st FOB to the dealer last week. As the week progressed, the higher end of that range was the more likely price out of regional shipping points.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was reported at $475-$495/st FOB.
Western Cornbelt: Granular ammonium sulfate was $450-$475/st FOB in the region, with the low reported in Missouri on a spot basis.
South Central: Granular ammonium sulfate pricing remained steady at $410-$450/st FOB regional warehouses. Effective July 21, American Plant Food Corp.’s ammonium sulfate postings firmed another $35/st to $440/st FOB Mermentau, La.
Southern Plains: Effective July 21, American Plant Food Corp.’s granular ammonium sulfate postings in Texas firmed to $410/st FOB Freeport, $420/st FOB Galena Park, $440/st FOB Fort Worth, and $450/st FOB Littlefield; coarse grade postings moved to $385/st FOB Freeport, $395/st FOB Galena Park, $415/st FOB Fort Worth, and $425/st FOB Littlefield; standard grade moved to $375/st FOB Freeport and $415/st FOB Littlefield; and N-Pac Compacted moved to $425/st FOB Galena Park. Those levels were up $35/st from APF’s July 7 postings.
Martin Resources’s ammonium sulfate postings on Aug. 12 moved to $440/st for granular and $415/st for standard.
U.S. Imports: Imports were up 14 percent for the fertilizer year ending June 30, to 458,143 st from the prior year’s 402,212 st. They were off 8 percent in June, to 21,489 st from the year-ago 23,313 st.
PHOSPHATES
Central Florida: In comparison to recent weeks the Central Florida market was booming last week, with prompt sales of both DAP and MAP. However, that amounted to only a small quantity.
Across the country, dealers’ bins were full and there was simply no place to put new product. Most buyers made their move back in April and May, when prices were on their way up and still much less than today’s market.
Corn prices were on the minds of dealers and farmers last week and will continue to be the topic of discussion as the industry prepares for the fall season. Farmers in the upriver areas will not be able to get their crops harvested until late September or October, and many dealers said their customers were not planning on buying until after the harvest. That could pose a problem. Much of the areas are served by the NOLA barge market, which will not be available, and railcar capacity will be limited.
CF dropped its price for Central Florida and the Gulf’s river markets by $20/st FOB. In addition, the company reduced the premium it charges for MAP to $60/st FOB more than DAP, rather than the $75/st FOB premium it had been seeking.
The new sales last week were made within the previous week’s range. As a result, the Central Florida DAP price range last week was unchanged at $1,070-$1,080/st FOB. PCS Sales’s Central Florida reference price remained unchanged at $1,070/st FOB for DAP and had a $25/st FOB premium for MAP. Mosaic was asking $1,090/st FOB for DAP and $1,115/st FOB for MAP, but was making sales at $10/st FOB for both products last week. CF dropped its asking price from $1,070/st FOB for DAP to $1,050/st FOB, and from $1,145/st FOB for MAP to $1,110/st FOB. In Texas, Agrifos’ DAP price was $1,100/st FOB for trucks and $1,095/st FOB for rail shipments.
U.S. Gulf: The NOLA DAP barge market and prices stagnated the past several weeks because farmers were not yet in the market and dealers and traders had pretty much filled their bins earlier in the year. However, last week a buy of five NOLA DAP barges was made at well below the NOLA DAP barge price range for the Gulf – $30/st FOB. The buyer wanted the material for one of his busy terminals and said his suspicions that product could be purchased well below the range were confirmed. One of the problems with making buys has been that warehouse prices were about the same or even lower than the cost of DAP barges. After taking the cost of transportation and throughput into consideration, buyers would have lost money on any deals at the previous range. The prices of commodities in general – such as oil and grain – have been falling, and phosphates may be joining the parade.
The price of corn was moving up during the past week but was still below $6/bushel, and both dealers and farmers were taking a wait-and-see attitude. While some in the industry believe farmers can still make a profit at $5/bushel for corn, others said growers do not want to risk putting out such large sums for only minimal profits and might make a major switch to soybeans for the next crop. What was still unknown was whether the recent buy at lower prices will become a trend or was simply a blip. However, that should become clearer during the next several weeks.
With the sales last week, the NOLA DAP barge price range dropped to $1,040-$1,080/st FOB from $1,070-$1,080/st FOB. MAP barges were $25-$60/st FOB more than DAP, but supplies were scarce. Mosaic’s asking price for NOLA DAP barges was $1,100/st FOB and $1,125/st FOB for MAP, and its prices for October and November will increase $10/st FOB. CF dropped its DAP price by $20/st FOB and lowered the premium it charged for MAP to $60/st FOB from $75/st FOB, so its prices fell from $1,070/st FOB to $1,050/st FOB for DAP and from $1,145/st FOB to $1,110/st FOB for MAP for prompt deliveries.
The number of phosphate barges on the river system was extremely limited last week, which matched the amount needed by the market. While some feared that might be a sign phosphate prices may finally start a decline, don’t count on it. Business in August is never exactly robust, and this year is more like normal. The only thing that might throw a wrench into the system was a lack of early ordering for the upriver areas, considering the river will close sometime in mid-October. The problem was that due to cold and wet weather in the spring, farmers in the upriver region were late getting their crops into the ground, and most won’t even begin harvesting until sometime in early October this year. Most dealers in the area filled their bins earlier this season when the price of phosphates was taking giant steps on a nearly daily basis, and were reluctant to refill at the current high prices until the farmers begin drawing down some of those supplies. By the time that happens it will too late for barge traffic, and railcar shipments out of Central Florida will be jammed.
One of the biggest obstacles faced by traders and dealers has been the high cost of capital and fertilizers. Borrowing the money to buy inventory that will not be needed for several months has become extremely difficult and expensive.
Farmers in Oklahoma will begin putting their wheat crops in during August, so business for phosphates there was expected to pick up soon. People in that state were rejoicing last week when a cold front moved in and plunged temperatures below 100 degrees and the possibility of rain increased.
Eastern Cornbelt: DAP out of warehouses remained at $1,100-$1,105/st FOB for DAP at river terminals and $1,120-$1,130/st FOB at inland locations. MAP, which was in short supply, was $1,125-$1,150/st FOB.
Western Cornbelt: DAP was down slightly at the top of the previous week’s range at $1,080-$1,100/st FOB regional warehouses. MAP supplies were scarce and the price was pegged at $1,125-$1,150/st FOB, which was a premium to DAP. 10-34-0, where available, had a range of $1,150-$1,175/st FOB level last week, but spot tons were difficult to find.
Southern Plains: DAP was quoted at $1,080-$1,100/st FOB the Tulsa market, with MAP tagged at $1,135-$1,140/st FOB.
U.S. Export: India was active in the phosphate market last week, but PhosChem was not the beneficiary. Buyers in that country purchased four vessels, amounting to around 120,000 mt, from sellers in Turkey and other undisclosed countries. In addition, India finally reached an agreement with OCP on a new super phosphoric acid contract at $2,310/mt, up substantially from the $1,985/mt under the previous agreement. The deal was critical for India, which would otherwise not have been able to obtain sufficient phosphate for its crops.
The export DAP price range last week was unchanged at $1,215-$1,220/mt FOB.
POTASH
Eastern Cornbelt: Potash pricing continued to be firm and replacement costs will be up. Sources quoted prices at $875-$930/st FOB.
Western Cornbelt: Potash prices saw a broad range of $875-$930/st FOB regional warehouses to the dealer, with most suppliers closer to the higher level.
Southern Plains: Intrepid’s postings will move up again on Sept. 2, with 60 percent granular muriate firming to $800/st FOB Carlsbad, N.M., and Moab, Utah, and $818/st FOB Wendover, Utah; 60 percent standard moving to $794/st FOB Carlsbad and Moab, and $812/st FOB Wendover; 62 percent standard moving to $820/st FOB Carlsbad; 62 percent fine standard moving to $823/st FOB Carlsbad; and 62 percent granular moving to $826/st FOB Carlsbad.
U.S. Imports: Potassium muriate imports were up 9 percent for the fertilizer year ending June 30, to 12.26 million st from the prior year’s 11.22 million st. Imports in June were off 4 percent, to 820,973 st from the year ago 855,819 st.
SULFUR
Tampa: Refineries were operating normally, with no major shutdowns in production reported. In the U.S., supplies were adequate and no shortages were reported. A source said that even if a hurricane hit the Gulf, major users in Tampa would have sufficient supplies to continue their operations.
Several people at a park in Hillsborough County, Fla., told officials they felt ill after a sulfur leak at a Mosaic phosphate processing plant nearby. Hazmat crews responded to the leak, which was not considered serious. Local media reports said three people were evaluated at the scene, but none were hospitalized.
With China still holding off on making and taking sulfur until after the Olympics, prices on the world market continued to soften. China was said to be taking a hard line on prices for new contracts. Normally, that country’s biggest need for sulfur is during October and November, so it will need product sometime before then. The world market has stalled as a result, but in the U.S. sulfur prices, which were recently settled for the third quarter, have remained higher than in the past – but not as high as the world markets.
West Coast: Negotiations for third quarter contracts were underway last week, but no resolution was in sight. With world prices beginning to soften and domestic prices higher, there was a disconnect between what suppliers want and what customers, who supply the world market, were willing to pay.
U.S.Imports: Imports were up 45 percent for the fertilizer year ending June 30, to 2.21 million st from the prior year’s 1.53 million st. June imports were up 43 percent, to 124,529 st from the year-ago 124,529 st.