U.S. Gulf: Prompt granular barges spanned a broad range last week at $228-$255/st FOB. Sources said the low represented tons from a vessel due in toward the end of the month, while the high end was for loaded barges ready to go.
Others reported barges as high as $260-$265/st FOB, but those were generally reported as moving barges, with some almost to their destinations. April was generally put between $225-$235/st FOB.
Prill price ideas were waning, with the most recent prompt trades put as low as $243/st FOB. Product was quoted for late April at $228/st FOB.
Eastern Cornbelt: The granular urea market was quoted at $300-$310/st FOB in the Eastern Cornbelt, with the low out of river locations and the upper numbers inland. “If there isn’t enough ammonia supply, then certainly urea and UAN will move, but right now it’s looking pretty dismal for those products,” said one source.
Western Cornbelt: The granular urea market in the Western Cornbelt was quoted at $300-$315/st FOB, depending on location, with inventories described as limited. One Missouri contact pegged the dealer market solidly at the $310/st FOB level in his area, and said tons were “shipping out as fast as we can unload it.”
California: The granular urea market was steady at $320-$330/st FOB port terminals in California.
Pacific Northwest: The granular urea market remained at $330-$340/st FOB port terminals in the Pacific Northwest, with the rail-DEL market steady $348-$360/st DEL in the region.
Western Canada: Granular urea was quoted at $505-$515/mt DEL in Western Canada, with some sources talking of a possible $10/mt increase for April delivery.
China: The hot domestic market has kept producers from offering any discounts to exporters. Sources said domestic prices have pushed the ex-port equivalent price to well above $230-$235/mt FOB.
While the export price is pegged around $215-$220/mt FOB, sources said producers have no incentive to move new material to the export warehouses until the domestic season calms down. To back up his estimate of the current price, one trader pointed to a purchase by Korea with a netback of $214/mt FOB. He noted that the Koreans usually bargain hard and get a good price on their purchases. To end up paying what the Koreans did, this source said, means the Chinese market has gained strength.
The producers got an initial boost in prices when the U.S. market heated up last month. By the time the last of the few cargoes were purchased for NOLA, the Chinese market domestic season began showing signs of strength. This past week confirmed a stronger-than-expected demand in China, which has pushed prices even higher.
Producers are looking hard at any overseas bids. Export warehouses hold about 1.5 million mt, said one trader. The owners of that tonnage are said to be willing to send the product back into the domestic system rather than accept a low bid. One trader said only a few cargoes have already been booked. The rest are sitting in the warehouses at the producers’ discretion.
Besides the material in the warehouses, sources said another 500,000 mt or so are slated for transfer to those warehouses. As of the middle of the week, sources reported that producers are seriously considering moving those tons back into the domestic market pipeline.
Producers could end up having a good first semester, said one source. The strong domestic market will last 30-40 days. When that market ends, India will have already called a tender to begin its 2016/17 buying. While India is not expected to make a large purchase in the first tender – about 800,000 mt at the most – the psychological impact of the beginning of the Indian buying season could have a bullish impact on Chinese prices.
The bottom line, said one trader, is that the combination of the flurry of activity for U.S. purchases followed by a strong Chinese domestic season has stemmed the slide in urea prices.
India: Industry watchers tend to agree that India is sitting on about 1.5 million mt of urea ready for the seasonal rains. That amount of product on hand means India is in no rush to buy product.
Sources expect the first tender to be called no earlier than April 15, about two weeks into the new fiscal year. By that time, said one trader, the maximum retail price and funds allocated for urea will be finalized. In the run up to the new fiscal year, media reports quoted government sources as saying there will be no changes to the MRP or funds to pay for subsidies.
Sources pointed out that the lack of any increase in the budget for urea subsidies is in fact a reduction, given inflation and currency fluctuations.
The Modi government has been enticing companies to either open shuttered urea plants or build new ones with a series of subsidies that require substantial up-front private investment. The goal of the government is to make India self-sufficient, either with domestic plants or through offshore joint ventures with favorable offtake arrangements.
Industry watchers said no matter how much the government argues to the contrary, India will still need to import at least 8 million mt this fiscal year, about the same amount as the current year. A portion of that tonnage will come from existing joint ventures, but the bulk will come from regular tenders run by MMTC, STC, and IPL.
Product will need to start arriving in May and is expected to end in mid-January. According to one trader, this means that India will have to receive about 800,000 mt each month. Sources said the only way the Indian infrastructure can handle that many tons is to spread the deliveries around a number of ports instead of just a few large facilities that can handle large vessels more quickly.
Tata Chemicals shut down its Babrala plant in Uttar Pradesh for a routine maintenance turnaround. The plant went down March 22 and is expected to remain offline for about a month. The plant’s urea output is rated at 864,000 mt/y. Sources said the shutdown, if it stays on schedule, should not impact the overall import plans for the country.
Middle East: Arab Gulf producers remain comfortably booked into April, and, if the producers are to be fully believed, well into May.
Sources reported that Oman was looking to sell a cargo, but was asking $215/mt FOB. One trader said that might be a realistic price given the bullish nature for spot tons. The general price from the Arab producers, however, is pegged at $200-$205/mt FOB for contract tons.
One trader noted that some deals have gone out trading movement and liquidity for price. Sales of contracted tons into Brazil reportedly have a netback in the upper-$190s/mt FOB. Likewise, some product slated for Thailand is pegged at $200-$205/mt FOB. Industry watchers pointed out, however, that these sales were set weeks ago and are based on a formula that allows for lower netbacks than spot deals or even newly negotiated contracts.
Part of the price support came when demand from the U.S. kicked into high gear last month. The last of the tons for NOLA are being loaded now. Additional purchases from Brazil, Africa, and Turkey added to the producers’ general feeling of well-being.
Egyptian production continues to go up and down based on natural gas supplies. Sources said the best the Egyptian plants can do right now is operate at 70-80 percent capacity.
The latest bid for Egyptian product came in at $220/mt FOB, and had, by press time, not yet been accepted by the producers. One trader said a weekend deal might be concluded a couple of bucks higher, but anything in the upper-$220s/mt FOB would make the product unsellable into southern Europe. This latest bid is down from the $232/mt FOB figure of several weeks ago that was rejected by the sellers as too low.
Egypt mostly sells its cargos in 6,000-7,000 mt quantities. Sources said this is the perfect size for the southern European ports. The Egyptians face the problem of southern European replenishment buying plans not being as strong as initially expected. Buyers apparently see no need to buy product at a premium, said one trader.
Southeast Asia: Sources said buying interest in Thailand will pick up once the rains start next month. For now, said one trader, buying is only based on cargos required under long-term contracts.
Thai buyers are reportedly looking for $200-$205/mt CFR for their product from the Arab Gulf. One observer noted that this is same price the producers are looking at for a contract netback. Another trader said the more likely Arab Gulf netback for the current few cargoes that are booked for Thailand is in the $190s/mt FOB.
Thai buyers have rejected the prices out of China as too high. Sources said the Chinese producers are under no pressure to sell thanks to a strong domestic market, and refused to meet or beat the Arab Gulf price.
The Indonesia domestic season still has a month or so to go before demand seriously kicks in. At the same time, producers are rejecting export bids lower than $230/mt FOB.
Indonesian farmers are preparing fields for the rain. Residents of nearby Singapore are already feeling the impact of the slash-and-burn activities in Indonesia. A haze settled over the city-state and is expected to get worse in the next few weeks.
Black Sea: There remains limited availability from Yuzhnyy. Some Ukrainian plants are shut down because of the Russian occupation of some areas of the country, and others because of disputes over the price of natural gas.
What material is being made and pushed through Yuzhnyy remains pegged in the low-$190s/mt FOB.
Pakistan: The United Business Group (UBG), which governs the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), has asked the government to reduce the price of locally-produced urea in order to boost agricultural production, arguing that high prices are beyond the capacity of struggling farmers.
UBG said the difference in price of a 50 kg bag of locally-produced and imported urea is Rs200. In a March 23 statement, UBG Chairman Iftikhar Ali Malik said local producers must reduce profit margins to benefit growers and bar imports, which are expected soon. He said the government should also consider revising the sales tax and Gas Infrastructure Development Cess (GIDC) to make locally-produced urea cheaper. He warned that if appropriate steps are not taken, cheap imported urea will soon flood the market.
The National Assembly Standing Committee on Industries and Production earlier in March recommended that the government allow National Fertilizer Marketing Ltd. (NFML) to import urea.
The committee expressed concerns about inflated urea prices in the country and urged NFML to play an active role in breaking the “cartelization” of the industry by importing urea and selling it below domestic rates. The committee was informed by an NFML official that the total landed price of an imported urea bag in Karachi is Rs1,490, compared with the local urea manufacturer selling price of Rs1,900/bag.
Separately, the Finance Division and the Ministry of Petroleum have given the go-ahead to the Ministry of National Food Security and Research for framing a policy that will allow urea imports by the private sector. Under the existing policy, urea usually is manufactured locally or is imported only by the state-owned Trading Corp. of Pakistan (TCP) if the need arises.
Pakistan’s urea manufacturers, meanwhile, have asked the government to reduce or roll back feed stock gas prices instead of importing urea. The fertilizer manufacturers blame expensive gas for higher urea prices in the country.
In a March 12 letter to the Ministry of Industries and Production, they said that if a recent increase in gas prices is withdrawn, the average price of urea produced locally would be cheaper by Rs600-700 per 50 kg bag compared with imported urea. They said the GIDC has swelled to Rs300/mmBtu, compared with Rs197/mmBtu in 2011.
The manufacturers added that the average gas prices in the country were currently at $5.4/mmBtu for the fertilizer sector, compared with $2.54/mmBtu in the Middle East.