U.S. Gulf: Granular prompt barges prices continued to run up last week, though sources questioned whether the new, stiffer numbers would hold, as numbers were easing off in forward months. Sources said prompt trades were as low as $234/st FOB as the week began, but climbed as high as $264/st FOB. First-half March trades were called $258-$264/st FOB and all March was at $243-$247/st, with April at $229-$243/st FOB.
Some cited a fair number of imports expected within the next six weeks, which are likely challenging forward price ideas.
Prills spanned a broader range due to quality, put at $220-$240/st FOB, with sources saying quotes are now within the $245-$258/st FOB range for the next round of business.
Eastern Cornbelt: Eastern Cornbelt sources reported that “the bulls are running in the urea market,” spurred by a strengthening NOLA barge market.
Granular urea pricing firmed to $275-$295/st FOB regional terminals in the Eastern Cornbelt, up another $30-$40/st from last report, with the low reported at Ottawa, Ill., and other spot river locations early in the week. The Cincinnati, Ohio, urea market reportedly moved from $275-$280/st FOB early in the week to $295/st FOB for prompt or prepay by Feb. 18, reflecting an increase of some $40-$50/st from just two weeks earlier.
Urea pricing FOB Blytheville, Ark., had reportedly moved to the $280/st FOB level as the week progressed.
Western Cornbelt: The regional fertilizer markets were dominated by rapidly firming urea prices during the week. Sources quoted granular urea at $285-$295/st FOB in the Western Cornbelt, up another $25-$35/st from the previous week, with the low at St. Louis, Mo., and the upper end out of Iowa terminals on a spot basis.
The Catoosa, Okla., urea market had firmed as well, with sources reporting new business at the $285-$290/st FOB level by Feb. 18, and some suppliers reportedly contemplating a move to the $300/st FOB level at the port in the near term.
One contact noted “exceptionally strong urea movement” for wheat topdressing in the Southern Plains, with reports of allocations in effect at Enid, Okla., late in the week and concerns that inventories at Inola, Okla., may be tapped out soon as well.
Northern Plains: Northern Plains sources reported strengthening urea prices at mid-month, which supposedly produced an uptick in new sales.
The granular urea market had reportedly firmed to $280-$300/st FOB the Twin Cities, up $40-$50/st from late January levels. The lower end of the range was reported earlier in the week, but several sources said the $300/st FOB level was more common as the week progressed.
Delivered urea into south-central North Dakota was tagged at the $312/st level for Twin Cities tons at the low end of the range, while FOB pricing out of North Dakota terminals had reportedly firmed to $330-$339/st FOB for prompt or spring prepay, depending on location and supplier.
Great Lakes: The granular urea market was reported at $300-$315/st FOB in the Great Lakes region, up $5-$15/st from January pricing levels, with the low in Wisconsin. Michigan sources pegged the dealer market at $305-$315/st FOB, with the low at Burns Harbor.
Northeast: The granular urea market was pegged at $285-$300/st FOB in the Northeast, up some $45/st from late January pricing levels, with the upper end reflecting firming levels FOB East Liverpool, Ohio, as the week progressed.
China: The price run-up in the U.S. provided a rising floor for producers. Sources reported at least two cargoes of Chinese granular are either booked or already on their way to New Orleans. The spark to the market created by the U.S. demand prompted Chinese producers to start asking $215-$220/mt FOB for their product. Actual business is reported closer to $205-$210/mt FOB.
The new prices are a lot better than just a week ago, when reports circulated that Samsung had sold a cargo of granular product to New Zealand at a netback just under $200/mt FOB. The material is slated to be loaded early next week.
Producers are happy with the U.S. deals, because the netbacks are stronger than anything that could have been worked out with Asian buyers and even higher than anything the domestic market can provide. Also, said one source, loadings will take place early-to-mid-March.
The bullish attitude is expected to hold into March. After the middle of March, the only major buyer on the horizon is India. Traders said they expect to see a slight dip in prices between the end of the U.S. buying and the first Indian tender. That dip, however, is not expected to take prices back into the levels seen in January.
New demand based on the domestic season helped make the prilled urea producers happy as well. Sources reported demand is just strong enough to ease some of the inventory pressure producers were beginning to feel.
One report making the rounds said the ports were holding about 1.2 million mt of product. New estimates said about 400,000 mt of that quantity is prilled urea. Rather than move it back into the domestic market, traders expect it to remain ready for the first Indian tender of the year.
The remaining tonnage is granular. While the two confirmed cargoes to the U.S. are a drop in the bucket for the 800,000 mt or so of granular product in the warehouses, sources said the willingness of the U.S. to buy could move other buyers to now step in to avoid being caught in a rising market. Besides, said one trader, there could be one or two more cargoes purchased for NOLA delivery.
India: Indian buyers are still not expected to step into the marketplace until the new budget takes effect April 1. Sources reported stockpiles from last year’s purchases are more than sufficient to start off the next application season.
The ample reserves and a need to wait until the details of the new fiscal year budget are known have led many in the industry to speculate no tender announcements will come until after April 1. The recent bump in prices is not expected to change that plan.
Importers generally wait until mid-March at the earliest to call a urea tender since by then the national budget is usually in its final stages of approval. The Department of Fertilizers will have a good idea of how much money it will have for purchases and subsidies in the upcoming year.
One trader noted the U.S. material will be loaded by mid-March, leaving no other major buyers in the market until India steps in. He suggested a delay by India to even late April could push prices back down a few bucks. Few in the industry expect to see the price drop below $180/mt FOB in China, but prills could hover in the low $190s/mt FOB instead of the estimated upper $190s/mt FOB now.
Middle East: Most of the product sent to the U.S. from the Arab Gulf is under formula-based contracts. Sources said the steady flow of material to buyers around the world under various contracts – and reductions in production – kept the inventories in the area under control.
With the dramatic interest in supplying the U.S., producers in the Arab Gulf are once again firm in their pricing ideas of $210-$220/mt FOB. Traders said nothing was done at that level in the past week, but it could be a realistic level for early March.
The best estimate of pricing now puts granular at $205-$210/mt FOB, with the limited prills coming in about $5/mt lower. However, a buyer coming in for a spot cargo will face producers determined to sell at $220/mt FOB. Besides pointing to the bump in pricing caused by U.S. demand, producers can honestly claim they have limited reserves.
Adding to the global psychology of higher prices, Egypt remains out of the urea production business. The reason for the shutdown is a lack of natural gas.
The government had hoped the disruption of a couple of weeks ago was temporary, but sources in Asia said the Egyptian plants are still closed.
Buyers from southern Europe looking for Egyptian product to satisfy their limited demands are now looking at other North African producers, Yuzhnyy, and the Arab Gulf. All three zones have the same “sold out” response until a higher price is bid.
Indonesia: Koch reportedly has a cargo of granular heading for the U.S. West Coast. Earlier in the week, sources were speculating Koch might try to move the material into NOLA, but apparently thought better of the deal.
Sources speculated the Koch cargo was based on its 2015 export contract with Kaltim rather than a spot deal.
Indonesia has been out of the export business because the producers did not like the way prices were moving. Reportedly, the producers placed a floor of $230-$233/mt on their product.
Sales of material earlier this year at a lower price could have been from the 2015 offtake formula-based contracts. Sources were adamant that no spot sales could have taken place for less than $230/mt FOB. To back up their position, sources reported Kaltim scrubbed an auction slated for Feb. 19 because it became clear the floor price would not be reached.
Bangladesh: A deal between Saudi Arabia and Bangladesh signed this past week will take BCIC out of the import tender business. The agreement will have Sabic provide 200,000 mt of granular and 105,000 mt urea to Bangladesh.
The imports will supplement domestic production enough that import tenders by BCIC will most likely not be necessary this year. Bangladesh media report the Bangladesh industry minister said the deal will guarantee enough urea for the 2016-2017 application season.
Traders in Asia said the deal could have a long-term impact on Chinese prices.
Most of the cargoes offered in the 2015 tenders came from Chinese sources. With Saudi Arabia taking back the Bangladesh market, the Chinese producers will have to find a new home for their product. Sources said the action could put a downward pressure on prices just as a price recovery was starting.
Black Sea: Sources reported producers are trying to take advantage of the uptick in prices. However, one observer noted the movement is on granular urea. Yuzhnyy mostly moves out prilled urea. Still, said one source, that does not stop the producers from trying.
