U.S. Gulf: Granular urea barges spanned a broad range last week, with trades reported in the $183-$196/st FOB range. Product began the week strong, but quickly fell before rebounding to the high-$180s/st FOB by the end of the week.
Sources said there was really no reason for the stumble. Overall, supplies continue to be reported as tight.
The latest prill trades were put in the $202-$205/st FOB range.
Eastern Cornbelt: Granular urea prices continued to edge up in the Eastern Cornbelt. The urea market was quoted at $218-$235/st FOB in the region in late August, with the low reported at Cincinnati, Ohio, and the upper end out of spot inland locations.
Western Cornbelt: Granular urea pricing was quoted at $220-$225/st FOB out of most terminals in the Western Cornbelt, with the low end reflecting a $5/st increase from last report.
Northern Plains: Granular urea pricing had reportedly inched up to $220-$230/st FOB the Twin Cities, up $10-$20/st from early August, with delivered tons pegged at $250-$260/st in North Dakota for the last business. Sources said Carrington, N.D., was out of product in late August.
Northeast: Granular urea pricing in the Northeast had reportedly inched up to $235-$240/st FOB, up some $10/st from early-August pricing levels, with the low at East Liverpool, Ohio, and the upper end FOB Fairless, Pa.
Eastern Canada: The granular urea market was pegged at $340-$360/mt FOB in Eastern Canada, down $10-$20/mt from mid-July pricing levels, depending on location.
India: Sources said IPL had not moved on its tender of earlier this month for 120,000 mt. Last week, the buying house wanted offering companies to extend the validity dates of their offers from Aug. 17 to Aug. 24.
The lack of urgency in buying fits with reports coming out of the country. Sources report that local agents are telling the major trading houses that consumption of urea is down as much as 15 percent.
One trader noted that a decrease in the consumption of urea is significant, because it is the cheapest fertilizer in India available to farmers due to the large subsidies it enjoys.
Even with the lull in buying, sources said Indian buyers will have to step in sometime in late September. According to government estimates, the country will still need to import at least another 3 million mt by the end of the year to meet expected demand.
When India does come in, sources do not expect to see dramatically lower prices. The spot urea market has tightened in the past couple of weeks, largely due to U.S. purchases. Even once the sales to the U.S. ease off in the next week or so, sources point to less overhang and some tightening.
Fertilizer Minister Ananth Kumar said the Indian government will soon set up a council for fertilizer research. He said the purpose of the council will be to help farmers develop best practices for fertilizer use and application. Kumar said the government will also be looking at ways to make the use of other fertilizers more attractive to farmers.
A number of Indian governments have attempted to wean farmers from urea by encouraging the use of other inputs. Sources have said, however, that as long as urea remains heavily subsidized, farmers will stay with the cheapest option.
Middle East: The biggest beneficiary of the recent spate of U.S. spot purchases seems to have been Algeria, said sources. The lower shipping time compared to buying from the Arab Gulf or China is the big reason Algerian tons are heading for NOLA, noted one source.
Contracted material from the Arab Gulf for the U.S. had to be loaded by this week to make it to the U.S. Gulf ports before the river closes for the season.
Arab producers continue to argue the price is just under $200/mt FOB, but sources continue to point to sales around the world – notably Asia – that have netbacks closer to $190/mt FOB.
Egyptian producers once again have natural gas available to them. The Egyptian Holding Gas Co. has started sending its product to MOPCO and other urea producers. The move to release gas that had been diverted for electricity production came as most of the Egyptian urea facilities were taking routine maintenance shutdowns.
Sources said the general condition of the urea market and the natural gas diversions made the timing for the turnarounds perfect. One trader said the normal schedule would have had the plants starting up again in early September. The current state of the urea market, however, may prompt the plant operators to take their time coming back online, he noted.
The price of urea out of Egypt remains steady, largely because of the limited supplies and some European buyers looking to cover a few short sales.
Work on the Iranian Zanjan ammonia and urea operation has reportedly started back up after about seven years of stop-and-go. The plant is expected to be completed next year. Urea output is rated at about 1 million mt/y.
Black Sea: Production is down with the shutdown of OPZ. Sources said the company is expected to extend the maintenance turnaround as long as possible. One observer noted that the poor nature of the ammonia and urea markets may prompt the operator to keep the operations down until the first frost.
Prices have not shifted in the area, but are under pressure because of increased competition in the Mediterranean from North African producers.
China: The bump in prices – thanks to the U.S. spot demand – does not seem to have affected the Chinese market.
Sources said the short timeframe to get product to the U.S. Gulf ports eliminated Chinese material from the running. However, said one trader, producers were taking advantage of the atmosphere of stronger urea prices to dig in their heels and fight off bids that would take the price below $190/mt FOB.
Producers continue to ask for $200/mt FOB and up, while buyers are asking sub-$190/mt FOB. Sources said the final deals for regional purchases put the price in the low-$190s/mt FOB.
Sources said producers are now beginning to look at domestic market needs rather than fighting over prices on the export market. Domestic demand is expected to start picking up in a few weeks.
Asia and Pacific: Sources said the rains in Thailand and Australia have been improving the lot of farmers and increasing the demand for urea in those countries.
Thai buyers reportedly are asking for additional spot tons above and beyond their existing contracts. Likewise, the improving conditions in Australia have prompted farmers to draw down more of the existing reserves, prompting some traders to consider additional sales into that country.
Pakistan: The government lowered the price of urea by 27 percent in a move to reduce stockpiles. The new price will be PKR1,310/50 kg bag, or about PKR26,200/mt (US$250/mt).
The order came as reserves were building because of both domestic production and imports through contracted deals, mostly with Saudi Arabia. The government estimated the excess tonnage at 850,000 mt. The move is expected to cost the government about US$25 million in losses covering the cost of the product and the sales price.
Part of the reason for the excess tonnage, the government explained, was that TCP imported about 350,000 mt last fiscal year to make up for an estimated deficit in domestic production. Of that amount, analysts said only 67,000 mt of product was able to work its way into domestic distribution. The rest was stored by National Fertilizer Marketing Ltd. It was these tons the government wants to move out of warehouses into the fields.
Lower demand by farmers due to poor weather and an overhang of about 200,000 mt held by NFML from previous year imports led to the large surplus.
Local producers were not able to operate at full capacity because the natural gas they needed was diverted to consumer-related needs, such as heating and electricity generation. Once the local producers received their full allotments, production soared.
The producers have long argued that it is cheaper for the government to import natural gas to accommodate their needs and the other needs of the country rather than importing urea. They said domestic production could easily handle demand and could more easily be adjusted if demand falls off, as it did in the past 12 months. Demand in Pakistan is pegged at 5.1 million mt/y. Domestic production is rated at 5.5 million mt/y.
In the end, the government decided the carrying costs of holding onto the excess imported urea would be more expensive than paying for the losses incurred by their current action.