U.S. Gulf:
Market participants said they were seeing a market correction earlier in the week, with NOLA trading early in the week at $482/st FOB for first-half October. Full October prices were said to be falling into the $470s and November in the $460s/st FOB.
The news on Sept. 15 that CF Industries was idling its U.K. nitrogen plants due to soaring natural gas prices once again lit a fire under the NOLA market, however. Loaded September barges were reported to have traded at $515-$538/st FOB, higher than early-week sentiment for forward cargoes, but still below the week-ago $518-$552/st FOB.
Eastern Cornbelt:
Urea prices continued to climb in the Eastern Cornbelt, fueled by the previous two weeks of rapidly strengthening NOLA values after Hurricane Ida.
Urea prices were quoted at $525-$545/st FOB Cincinnati, Ohio, and most Illinois River terminals, up from the prior week’s low of $490-$505/st FOB. The upper end of the regional range was pegged at the $550-$570/st FOB level on a spot basis, with the high confirmed out of some Ohio River locations as the week advanced.
Western Cornbelt:
The urea market was quoted at $550-$570/st FOB in the Western Cornbelt at mid-month, with the low confirmed at St. Louis and Caruthersville, Mo., and the high in Iowa.
Southern Plains:
The Catoosa/Inola, Okla., urea market reportedly started the week at $550-$555/st FOB before climbing to $570-$575/st FOB for new offers on Sept. 16. Sources pegged the Enid urea market at $560-$565/st FOB late in the week, with the Houston, Texas, market quoted at a solid $575/st FOB.
South Central:
Sources pegged the urea market at $530-$570/st FOB terminals in the South Central region, up another $10-$20/st from the previous week and a full $55-$85/st from late August, with the low reported at Convent, La., and the high at Owensboro, Ky. Other spot prices at midweek included $550/st FOB Little Rock, Ark., $560/st FOB Shreveport, La., and $550-$570/st FOB Memphis, Tenn.
Southeast:
Urea was pegged at a firm $515-$535/st FOB port terminals in the Southeast, up another $5-$15/st from the previous week, with the upper end reported at Wilmington, N.C., and reflecting a $55/st increase since late August.
India:
The fertilizer world is waiting for India to call its urea tender. Sources said Department of Fertilizers (DoF) and RCF representatives met this week to figure out financing for the tender.
Sources said RCF experienced some troubles issuing letters of credit for some of the awards issued in the last tender. Traders reported that the delay in calling the next tender is tied to making sure the credit lines for RCF are clear and large enough to cover the anticipated quantities. Reportedly, RCF asked the DoF for an advance of 40-50 percent before it called the tender. Sources said the government officials rejected that idea.
There are no doubts that India needs the urea, with media reports of localized shortages throughout the country. The shortages are occurring even as the country reports current supplies from ports to local distributors of 4 million mt.
Sources said RCF will need to buy at least another 1.2 million mt just to keep up with demand. However, reports out of China indicate that if Beijing allows exports, the tonnage might top off at 450,000 mt. At the same time, Arab Gulf supplies remain limited and support from the Black Sea is not expected because of the rising cost of natural gas in Ukraine, causing urea and ammonia plants to close down.
Even if the tender is called on Sept. 17, sources said the first cargoes from China will not begin to be shipped until October. At that point, Indian demand will be competing with the Chinese domestic market. If Beijing sees prices rising too much or if it appears that too many tons are being offered for export, the central government could impose restrictions or tack on a special duty on the exports.
Depending on how many tons RCF is able to secure in this tender, sources said it is likely the company will keep coming in with tenders for the rest of the year. Depending on how each tender goes, said one source, the line-up of tenders could extend all the way through March, the end of the Indian fiscal year.
China:
Sources said there may soon be further cutbacks in production. Traders noted that the issue of having enough energy to power the plants remains a continuing problem. Sources said getting the urea to the ports and then onto vessels is also a growing concern.
Environmental inspections and penalties have also stepped up. Reports are circulating that more environmental inspectors are spreading out among the industrial sector issuing citations for violations of emissions standards. In some cases, the citations include shutdown orders.
Sources said the central government is leaning on local energy producers to ensure enough electricity and heat for residential customers as the winter season approaches. Similar actions to protect the power grid during heatwaves in the summer caused a dip in urea output.
Restrictions on how many foreign-flag vessels may enter a Chinese port at one time and how long those vessels must remain in quarantine for COVID continue to create issues for exports. Reportedly, some vessel owners are hesitant to allow their ships to be held up by Chinese quarantine rules and then face similar delays on the Indian side of the trip.
While this concern was raised in the last tender, sources said the owners just increased their prices to accommodate any time at anchorage. Now, however, the owners seem to be pushing back harder against having their vessels tied up waiting to enter a port.
Sources said the government is also keeping the threat of either export quotas or an export duty hanging over the heads of the urea industry. The government has made it clear to the urea producers that their first responsibility is to ensure a plentiful supply of low-cost urea to farmers beginning Oct. 1. The looming threat of some action to limit exports has led some suppliers to withdraw their offers to traders for offshore sales. This move could add to a reduction of available urea for the upcoming Indian tender.
The price for prilled urea remains in the $420/mt FOB following some deals concluded in late August and early September. Sources said some top-off purchases of granular urea were concluded in the $430s/mt FOB. At the same time, sources talked of reports of a granular sale to Australia with a netback in the low-$430s/mt FOB.
Industry sources were not able to name any specific buyers or traders who handled any of these reported granular sales, however. The one exception is a report that a sale to the West Coast of Mexico was done in September with a netback of $425-$430/mt FOB. Sources said they could not find out any other details of the deal.
September production of urea is reportedly down from August. Government figures showed that the daily production rate has dropped 10,000 mt since last month, to 135,000 mt.
Middle East:
Sources said price discussions in early September at $440/mt FOB are now being replaced with higher price expectations. Sources reported that Sohar sold a November cargo in the mid-$470s/mt FOB. The price fits with what industry watchers were saying was happening in the market. The moves come as Egypt is showing prices not seen since 2013, and as CIS urea availability is being reduced due to higher production costs.
High natural gas costs in Europe are causing more companies to think importing urea is cheaper than producing it. As a result, inquiries are coming to every producer in the region.So far, sources said Arab Gulf producers are focusing on their contracts. At this point, that leaves little product for spot deals or even for new contracts for prompt shipment.
Egyptian producers MOPCO and AlexFert watched their prices go up dramatically all week. Last week closed with September and October shipments at $475/mt FOB. This week opened at $480/mt FOB and closed at $495/mt FOB. The price rise continued to $520/mt FOB for November sales.
Shortly after inking the deal for $520/mt FOB, MOPCO announced it would not make any further November sales until it has had a chance to evaluate the market situation.
The rapid increase in the Egyptian price was attributed to European buyers looking for material as high natural gas prices lead to possible closures of European urea producers.The actual price for Egyptian urea has already surpassed the paper market of $470/mt FOB for September and $480/mt FOB for October.
North Africa:
Algeria’s AOA has kept a close eye on the Egyptian deals and has altered their prices accordingly. A November cargo was reportedly sold at $480/mt FOB, with producers now looking at $500/mt FOB.
The current price was backed up by reports that a sale to the U.S. for delivery to NOLA was pegged at $535-$541/mt CFR, for a netback to Algeria of $485/mt FOB.
Black Sea:
Rising natural gas prices are forcing urea plants to shut down. Sources said the shutdowns would eliminate a few cargoes of urea that would normally be a part of any Indian urea tender, putting more pressure on the Arab Gulf and China to supply the product.
One industry observer noted that at the current cost of natural gas to the Ukrainian producers, urea would have to be sold at $500/mt FOB from Yuzhnyy just to break even. Even in a tight market, sources said that level is not easily attained.
Russian urea exports for January through July were down 5.7 percent, according to Trade Data Monitor, to 3.9 million mt from 4.1 million mt during the same period in 2020. Brazil took 726,000 mt, followed by Finland at 505,000 mt. However, the Brazilian government reported imports from Russia at 995,000 mt. Sources said about half of the tons sent to Finland were then sent on to Brazil and some other Latin American buyers.
A similar discrepancy showed up in the Russian numbers related to exports to Switzerland. According to data released this week, Russia sent 358,000 mt to Switzerland. However, the Swiss numbers for the same period showed Russian imports of only 53,000 mt. The difference had some international sources scratching their heads trying to figure out what Switzerland would do with so many tons of urea.
American purchases from Russia were up 52 percent in the January-July period, to 237,000 mt from 156,000 mt during the same period in 2020. July exports for 2021 were reported at 499,000 mt, down 21.8 percent from 637,000 mt last year.
Brazil:
Uncertainties related to when RCF will call its tender has the Brazilian market moving up. As the week ended, deals at $540/mt CFR were closed in Paranagua for an October cargo. Throughout the week, deals had been bouncing around $505-$510/mt CFR and then suddenly jumped at the end.
The higher prices were attributed to the loss of U.S. urea production related to Hurricane Ida and rising prices out of North Africa, especially Algeria – a regular Brazilian supplier – and Egypt. The expected loss of European production due to higher natural gas costs, and a lack of clarity on how many tons China will make available to the global market, were additional factors.
The range in Rondonopolis widened to $605-$695/mt FOB ex-warehouse. The demand for product stiffened as buyers looked for top-off tons before further possible increases after the Indian tender.The barter rate in Sorriso is 87 bags of corn for 1 mt urea. Last week the rate was 80 bags of corn.
The PAU plant in Bolivia is expected to start sending tonnage to Brazil via truck this month. Sources said the total tonnage expected to come to Brazil is about 200,000 mt. Reportedly, Swiss Singapore is handling the details for the sales and transportation.The most likely destination for the urea will be the state of Mato Grosso.
South Korea:
Urea imports for January through August were reported at 619,000 mt, down less than 1 percent from 624,000 mt during the same period last year, according to Trade Data Monitor. The main supplier was China at 506,000 mt.
August imports were up 34 percent, to 43,000 mt from 32,000 mt in August 2020. China supplied the full amount this year.