U.S. Gulf: The prompt granular urea market continued to be firm last week, with sources reporting new trades in the $252-$265/st FOB range. Price ideas for March and April were lower, however, with March down into the $250s/st and April falling off into the $230s/st and $240s/st.
While some players downplayed the quantity of coming imports, saying many of them had already been accounted or paid for, others estimated that some 900,000 mt of product could hit the U.S. by late April. Sources were China, Indonesia, Algeria (prill), and Arab producers.
On the prill side, price ideas have been boosted, with the most recent business put in the $240-$245/st FOB range. Quotes into March are reported to be $245-$250/st FOB, with the product reaching toward a granular equivalent – although it could meet granular on its way back down if some sources are correct.
Eastern Cornbelt: Granular urea pricing was ratcheting up, with most sources quoting the Eastern Cornbelt market at $295-$305/st FOB for new business in late February. “There is lots of discussion about the urea market structure for the next 3-4 months,” said one contact.
Western Cornbelt: The granular urea market was tagged solidly in the $295-$305/st FOB range in the Western Cornbelt, up another $10/st from last report.
Southern Plains: The granular urea market saw extremely heavy demand out of Inola/Catoosa, Okla., with sources reporting movement out of the terminal as “wide open” and suppliers struggling to keep up with demand in late February. “Product is moving out of the Tulsa market faster than it can be replenished,” said one contact.
Urea was quoted at $290-$305/st FOB at the port, up roughly $50/st from just three weeks earlier, with several sources pinning the market solidly at the $300/st FOB level as of Feb. 25.
South Central: Granular urea pricing was quoted at $290-$300/st FOB terminals in the South Central region, up a full $45-$55/st from just three weeks earlier. The low end of the range was reported FOB Memphis, and the upper end out of spot Arkansas River locations.
Southeast: Granular urea pricing was up significantly in the Southeast. Sources reported port terminals in the $290-$300/st FOB range as the week progressed, up from $270-$285/st FOB the previous week. There were reports of some suppliers eyeing a move to $310/st FOB for the next round of business.
China: Sources said traders anxious to take advantage of the hot U.S. market have booked 5-6 panamax vessels from China to NOLA. The netback on the product was pegged at $215-$220/mt FOB, with some arguing that a deal or two may have been done at $210-$215/mt FOB. The general consensus, however, is that the week closed with sales in the upper teens.
The 360,000 mt or so booked to go out would normally be considered good news. Sources note that even after those tons are loaded and gone, however, Chinese ports will still have about 800,000 mt of granular product sitting in warehouses looking for a home.
In addition to the granular urea still in warehouses, another 500,000 mt or so of prilled urea is also on hand, with no buyer in sight.
After the U.S. buying is done, sources said hopes for more sales will focus on the rains in Australia. If enough moisture hits the farm fields, sources speculated that a few buyers might step forward to place some pre-planting bids. These tons would be in addition to the cargoes already on hold for April-May shipment from the Arab Gulf. Any Chinese product sold will most likely be spot tons if the weather cooperates.
Other smaller sales might be able to take place with buyers in Asia. Sources stressed that the demand for granular product in the region is limited.
Prilled sales are not expected to start up until India comes in with a tender. The best guess is the call will not come until mid-April, after the new budget is in effect and the government has had a chance to study the supply and demand numbers one more time.
Prilled urea prices are put at a $5/mt discount to the granular product.
India: The Indian government has long been working on ways to reduce its subsidy payments for urea. The latest plan involves direct payments to the farmers.
According to media reports, the Department of Fertilizer is looking at the details of farmers’ purchases, with the idea of paying farmers the difference between the cost of the urea and the subsidized rate of $77.88/mt.
A trial plan for phosphates and potash is being planned for 20 districts. There is still no word on how the government will deal with the more contentious issue of urea subsidies. The government has so far offered subsidies to urea producers to improve output in existing plants or build new facilities, with the hope that subsidy costs will be reduced as more domestic urea hits the market.
Besides encouraging companies to build or upgrade facilities, the government had about US$5.5 billion earmarked for domestic urea subsidy payments in the current fiscal year, which ends March 31.
Domestic production is expected to be 6-8 million tons short for the next year despite the incentives to build new plants. The deficit will have to be made up with international tenders. International industry watchers said the first tender of the current season will most likely be called sometime in the middle of April. By then, said one trader, the subsidy plan will be firmly in place and the government will have a better picture of the demand by farmers.
Indonesia: Kaltim closed an auction late last week.
Dreymoor stepped in at the last minute with a bid of $231/mt FOB. The cargo is expected to go to the U.S.
Initial bids for the 30,000 mt of granular product were sub-$200/mt FOB. As the time neared for the online auction to close, no one approached the floor price of $231/mt FOB. Sources said Dreymoor pulled the trigger at the last minute to secure the cargo.
|
Bidding Company |
US$/mt FOB |
|
Dreymoor |
231.00 |
|
Dragon |
215.00 |
|
Swiss Singapore |
212.00 |
|
Koch |
210.00 |
|
Terra Commodities |
210.00 |
Sources said the low bids in the auction showed how traders view the market. The auction started with prices in the upper-$180s/mt and then moved into the mid-$190s/mt FOB. One trader said the price languished under $200/mt for a while before prices moved up to the reserve price as time elapsed.
Kaltim and the other Indonesian producers have been adamant that the lowest price they would accept was $310/mt FOB. Some cargoes have left the country at a lower price, said one trader, but those were deals closed under last year’s agreements with several trading houses to facilitate exports.
Besides the Dreymoor shipment, which will be loaded in late March, sources reported that another cargo sold to Koch will be sent to NOLA by the middle of March. If the Dreymoor cargo does not load in time to meet needs in the U.S., sources said the material could easily go to Vietnam, which does not place an import duty on Indonesian urea.
Middle East: Arab producers say they are sold out for March, and traders are ready to believe them. Sources point to the many tons flowing to the U.S. with March loadings as evidence that the sold-out claims could be true.
Prices moved up in the Arab Gulf once the U.S. demand caught on. Sources report that prices in late January were in the mid-$180s/mt, and now are at $215-$220/mt FOB.
Sources said a cargo of Iranian material was sold to Italy for an early March loading for $205/mt FOB.
The price difference between the Persian and Arab product is the norm. Sources said the difference will remain until banks handling U.S. dollars feel comfortable with Iranian business. One trader said the myriad rules and regulations involving transactions with Iran have so many banks nervous of one small mistake that they have decided not to back any Iranian deals until the dust settles. Euro-based deals, however, have fewer problems than the dollar-based operators.
The Egyptian urea plants are back online. Sources said the natural gas lines, which had been damaged in an explosion a few weeks ago, have been repaired. Once the plants started getting their natural gas, production ramped up to normal levels.
With the plants back online, tenders followed. MOPCO is expected to call a tender next week. Sources said Helwan was considering scrapping its tender of Feb. 25, but now appears to have gone ahead with it.
One trader suggested Helwan was hoping to replicate the Algerian price. In the end, however, HFC failed.
Helwan offered 25,000 mt of granular for mid-March shipping. Details of the tender were still sketchy as the week ended. Sources reported 10,000 mt was picked up by a trader, but no name was forthcoming. Sources said the price for the deal came in at $245/mt FOB.
Black Sea: The rebound in the global urea market had an impact on Yuzhnyy. Sources report that the last set of prices paid out of the Black Sea port were at $205-$210/mt FOB.
Industry watchers warned, however, that this price level seems to not be the pricing idea buyers are looking for in March cargoes.
Latin America: Sources report that Brazilian buyers are looking for bargains now that U.S. demand has fired up prices.
Reportedly Brazilian importers are driving hard bargains with traders and suppliers. For now, said one trader, the Brazilians are buying hand-to-mouth, taking only what they need. He noted, however, that at some point soon demand will outpace the ability to buy just one or two cargoes to keep farmers happy.
One trader said the Brazilians are in a good position to bargain. Besides the occasional spot tons, they have monthly shipments coming in under various long-term contracts. The contracted tons are giving the buyers a small cushion of reserves to argue for lower prices from producers.
Other Latin American buyers are reportedly looking at occasional cargoes from Indonesia and China to fill in small demands here and there. Sources said demand is not strong, but will likely be steady as long as the price does not skyrocket.