U.S. Gulf: Granular prompt urea prices continued to move up last week, with trades put at $232-$242/st FOB, up from the prior week’s $224-$236/st FOB. January trades were called $236-$240/st FOB. Sources reported a fair amount of activity.
Inquiries to CF and Iowa Fertilizer went unanswered about the status of their respective new production at Port Neal and Wever, Iowa. Both companies had expected ammonia production to start up early in December (GM Nov. 23, p. 1), with downstream production soon to follow. Industry watchers have been skeptical about the plant start times, however, and some said the fertilizer year-to-date 1.2 million st deficit in urea imports is prodding urea prices upward.
Prills were also higher at $230-$238/st FOB, up from the week-ago $227/st FOB.
Eastern Cornbelt: Granular urea fill tons were quoted in the $255-$265/st FOB range out of spot river locations in the Eastern Cornbelt, with the upper end pegged at the $270-$275/st FOB level out of inland terminals.
Western Cornbelt: The granular urea market continued to be quoted at $255-$275/st FOB in the Western Cornbelt, with the lower end reported in Missouri and the high in Iowa on a spot basis.
California: Granular urea pricing in the California market was quoted at $300-$320/st FOB port terminals, with the upper end of the FOB range reflecting a $10/st increase from last report. Delivered urea continued to be pegged in the $320-$330/st range in the state.
“I would expect to see all nitrogen prices move up even more early in the new year as the reality of delayed North America production and significantly stifled Chinese production hits the market,” said one regional contact.
Pacific Northwest: Granular urea was quoted at $295-$315/st FOB in the Pacific Northwest depending on location, with the upper end of the range reflecting another $10/st increase from last report. The market FOB Rivergate, Ore., was pegged in the $295-$305/st range.
Delivered urea had reportedly firmed to $335/st in the region for either truck or rail, up $5-$15/st from early December levels.
“I’m not sure where all the bears went, (because) the bulls are definitely leading the charge now,” commented one regional source.
Western Canada: The granular urea market in Western Canada had reportedly firmed to $455-$465/mt DEL for prompt and January tons, with reports of February/March shipments being offered at the $465-$470/mt FOB level from some suppliers. Sources confirmed spring prepay offers for tons shipped from April through June in the $475-$480/mt DEL range.
There were reports of at least one regional supplier coming out with spring prepay urea initially at the $490/mt DEL level, but, as one source put it, that level “might have been too steep,” because discounted offers quickly followed that were $10-$15/mt below that number.
China: Export product is scarce. Sources said the combination of reduced production and domestic demand is making it difficult to find bargains for international sales.
The inventory is being controlled more by the reduced production – still less than 50 percent of rated capacity nationwide – rather than new demand. Sources said there has been no big change in demand compared to this time last year.
Prices remain in the upper $240s/mt FOB. If asked, however, producers will offer at $250/mt FOB. One trader commented that the high offers handle two situations at once. If a buyer is desperate, he will accept the higher price and the producer will pocket a nice profit. If the buyer is just shopping around, the higher price will cause him to back off until the global situation changes.
Sources do not expect to see many plants re-opening in 2017. The strong emphasis that Beijing has on cutting pollution has forced a number of older plants to shut down. There is no indication the Beijing authorities will ease up on their pollution standards in the coming year.
At the same time, authorities appear to have shifted their emphasis on urea production to ensuring that domestic demand is fully covered, and only then will they look at exports. This is a shift from recent years, when China made sure domestic demand was met, but also sought to be a major player in the international urea market.
One trader said if production remains at current levels, the domestic demands will indeed be met with a few tons for export. If national production increased to 70 percent of rated capacity, said one observer, there would be a glut of product that could only be satisfied with lower prices offered on the international market.
There is still no official word from Beijing about export duties. The constant refrain in the rumor mill is that the 80 yuan/mt export duty will be dropped. One contrarian noted, however, that dropping the tax would encourage exports, something Beijing no longer sees as important.
In the past, Beijing would reveal its export tax intentions by this time of year, and industry insiders in the country would pass on the mainstream thinking to their international partners. This year, however, international traders are getting nothing from their Chinese teammates about what will happen on Jan. 1.
India: Traders who were once sure that India would need to call a tender in January are now saying they are not so sure it will happen.
Sources agree that India needs 500,000-600,000 mt to close out their buying plan for the fiscal years that ends in March. Some traders, however, are beginning to wonder how much of that tonnage is really needed and how much is for political cover.
There is a general view that calling a tender in early January would not make much sense. Supplies are limited, and prices are refusing to come down after the scrapping of the STC tender earlier in December. The first half of January is not expected to be much better in terms of supply and price, said one trader. By the end of January, however, producers will have built up reserves that could push prices down to levels more to the liking if Indian buyers.
If a tender is called, traders said the date and terms of delivery will tell a lot about the real needs in the country. Sources expecting a tender said the terms will most likely include limited tonnage and specific ports, most likely all on the West Coast.
If the tender is called in the first half of January, sources said that could mean the country really needs tonnage in specific areas to close out the current application season. If the call is made later in the month, however, sources speculated that the incoming tonnage will be to build reserves for the next season.
One other option might drive a tender call, said sources. Urea is a political hot potato in India because it is the cheapest input available to farmers, thanks to subsidies. If farmers perceive that there is not enough urea on hand, they complain to their members of parliament. From there the complaints take on a political nature that, in the past, has prompted immediate urea tender calls.
Middle East: Sources reported that the tightness in the Arab Gulf will most likely end with the new year. Plants that have been on extended maintenance shutdowns are beginning to slowly come back online.
For now, however, Arab producers are asking $250/mt FOB. Spot business is pegged closer to the mid-$240s/mt FOB, and contract sales for considerably less. One trader said Arab producers can get away with asking such a high price because of the temporary tightness in the region.
Sources reported one possible sale at $250/mt FOB out of Oman for January, but none could confirm the deal. One trader said that if such a deal did take place, it is most likely for an early January loading and is needed to fulfill a sale that was to have been supplied from a different location.
Soon after STC/India scrapped its tender, sources were expecting the regional price to drop as product from Iran and Oman went homeless. Sources now report, however, that all the tonnage slated for India has been snapped up at better netbacks than an India purchase would have allowed.
After sales last week by Egyptian producers at $242/mt FOB, the Egyptian market has gone quiet. Sources reported some discussion of prices moving past $245/mt FOB, but could not point to any business done at that level. One trader said it would be natural for producers to push on prices. He added, however, that it is also just as natural for buyers to push back.
Egyptian and Arab Gulf sales have benefited from growing demand in the U.S. by traders betting that new urea production will not come online in time for the spring application season. Likewise, European demand has also been strong, giving producers multiple ports of entry for their product.
And finally, Australia seems to be in a buying mood. Sources reported that good rains have prompted buyers to talk to their Arab Gulf partners about stepping up shipments.
Southeast Asia: Indonesia is shipping out the last of its tonnage for the year. Sources noted that the cargoes were all booked before the price of urea started it climb.
Sources said some of the cargoes being loaded now were supposed to have gone out much earlier. The delays were put off to berth congestions and bad weather.
The government and industry leaders are now looking at the 2017 export allocations and pricing ideas. Expectations remain that Indonesia will export at least 1 million tons next year.
Malaysia continues to have trouble with its newest plant, with sources reporting that the facility is running at 80 percent of capacity. However, sources said the bugs seem to have been worked out, and the plant should be at full production in January.
The increase in production from Malaysia will be good news for buyers in Thailand and New Zealand.
Black Sea: Sources reported no new business out of Yuzhnyy. Prices are expected to remain stable well into January.