U.S. Gulf: New prompt granular barges continued to garner a premium last week, with most players putting new trades within the $260-$270/st FOB range. Trades for all of March were generally put between $242-$253/st FOB. Product all the way out to May was priced at $220/st FOB.
Prills continued to strengthen, with prompt at $245-$250/st FOB and all March called $255/st FOB.
Eastern Cornbelt: The granular urea market remained at $295-$305/st FOB for new sales in the Eastern Cornbelt. One Illinois contact pegged the dealer market commonly at the $300/st FOB level or higher last week.
Western Cornbelt: Iowa sources quoted the granular urea market solidly at the $300/st FOB level for new sales last week. Region-wide, the urea market remained in the $295-$305/st FOB range in the Western Cornbelt, depending on location.
California: The granular urea market was quoted at $320-$325/st FOB port terminals in California.
Pacific Northwest: The granular urea market was quoted at $330-$340/st FOB port terminals in the Pacific Northwest, up $5/st from last report, with some sources touting the upper half of that range for new sales. One contact said urea supply could be a problem going forward due to projected delays for some import cargoes to the West Coast.
Rail-DEL urea was up a full $20/st from early February, with sources pegging the market at $348-$360/st DEL in the Pacific Northwest.
Western Canada: Sources reported firming prices for granular urea in Western Canada. The dealer market was quoted at $505-$515/mt DEL for March tons, up some $20-$25/mt from last report, with some suppliers reportedly pushing another $10/mt increase for April shipments.
India: The expectation of a softer market helps make the proposed 2016-2017 urea subsidies stretch further, said sources.
The proposed budget, released this week, will not increase the urea subsidies. Traders said the move actually means a decline in real buying power because of the declining purchasing power of the rupee compared to the U.S. dollar. According to the budget numbers released by the government, imported urea will be subsidized to the tune of about US$1.6 billion in the upcoming fiscal year.
Even though the market showed a bump up in the past few weeks because of increased U.S. demand, sources said the peak appears to have already been hit. Sources said April NOLA prices are being quoted at $50/mt lower than immediate March prices. Global production of urea shows no evidence of slowing down, putting additional pressure on prices.
For Indian buyers, the expected softer prices in April, combined with reserves of about 1 million tons, could give them a stronger bargaining position once a tender is finally called. International watchers said the first tender will most likely be called in mid-April.
China: Producers are now quoting prilled prices higher than granular, especially for April shipments. One trader said the move appears to be a reaction to the lower April prices quoted in the U.S. Gulf ports, and to expectations that India will come in with a mid-April tender.
Now that the U.S. demand for new cargoes has faded, sources said granular demand has gone soft. The next big market demand will be for prills when India comes back into the market.
Granular prices are being quoted at $210-$215/mt FOB, while prills are now being offered at $215/mt FOB. Sources could not point to any deals for prilled product at this new and higher level. One trader said by the time the first Indian tender is called, prices will once again drop.
Producers are said to have little influence over prices. Many plants are already running at 60 percent of rated value. One trader said the producers apparently have little desire to reduce output further for fear of causing massive layoffs in the industry.
The domestic market in China – a largely prilled market – is expected to slow down by the end of this month. Once local demand backs off, sources said April prices will definitely soften, leading Indian buyers to push even more aggressively for lower prices.
Also working against the producers to push up international prices are reports that the ports still hold about 1.5 million mt in storage, with no buyers in sight.
Middle East: Arab producers claim they are sold out for the month of March, and few in the industry are able to disagree. Sources pointed to some spot business that was booked late last month, but more importantly to the large number of long-term contracts with buyers from the U.S. to Australia.
April shipments are expected to depend mostly on the contracts, leaving some producers with a few extra tons that could work their way into the anticipated Indian tender. Sources said any discussions with producers about April tons are rebuffed as being too early, or begin with $215/mt FOB for destinations other than the U.S.
Traders say the $215/mt FOB level is too high for any buyer currently, and definitely too high for any April shipments in Asia or Europe.
In Egypt, MOPCO closed a tender for several 6,000 mt lots of granular material. Sources said the bids were in the low-$230s/mt FOB, and reflect the general view of a softer market.
Last week Helwan closed its auction at $245/mt FOB. The week prior, Algeria reportedly sold a cargo for $250/mt FOB. Sources said now that the euphoria from the U.S. buying spree has ended, the granular market is looking weaker.
The cargoes purchased from MOPCO are slated for delivery to southern European ports in April and early May.
Black Sea: Sources reported that prices are coming off. One trader reported a deal at $212/mt FOB only a week after producers were arguing for $220/mt FOB. Even though producers were looking at $220/mt FOB, sources said the price out of the area never really topped $215/mt FOB.
The Yuzhnyy market did not face the wild ups and downs of other areas, such as the Arab Gulf or North Africa, because most of the exports are prilled urea. The wild market swings were largely for granular product because of strong U.S. demand. Prilled prices only went along for the ride, said one trader.
Pakistan: Urea consumption and sales in Pakistan during the 2015 calendar year were flat at 5.6 million mt, according to a report from Engro Corp. Imports of urea declined from 700,000 mt to 600,000 mt in 2015 due to better local production, which stood at 5.3 million mt in 2015 and represented an 8 percent increase over 2014’s domestic production, the report said.
Pakistan imported 1.373 million mt of urea, DAP, and other fertilizer in the seven months from July 2015 through January 2016, at a cost of US$596 million. This compares with 1.224 million mt at US$561.52 million for the same prior-year period, according to data released by Pakistan Bureau of Statistics.
For the month of January 2016 alone, the country imported 23,796 mt of fertilizer at a cost of US$6.58 million, compared with 173,500 mt at US$49.73 million in December 2015, and 139,062 mt at US$63.44 million in January 2015.
In other news, Engro Corp., the parent company of Engro Fertilizers Ltd., has expressed its intention to sell up to 24 percent of its 86 percent share in Engro Fertilizer, according to a notice issued at the Pakistan Stock exchange.
The company has appointed advisors for the potential sale, subject to market conditions, by way of a private offering to local and international investors to allow the company to diversify its portfolio and meet its capital allocation requirements.