All posts by hlancey@bloomberg.net

Pupuk Partners on Indian Green Ammonia Project

Clean Ammonia, Green Ammonia, Indonesia, Low-Carbon

PT Pupuk Indonesia Holding Co. (Perseo) has signed a Joint Development Agreement (JDA) with Toyo Engineering Corp. and ITOCHU Corp. to develop and utilize green ammonia in Indonesia. The JDA is known as Green Ammonia Initiative from Aceh (Project GAIA).

The project will aim to produce green ammonia by leveraging part of the capacity from the existing ammonia plant built by Toyo in the 2000s that is currently operating in the Aceh Province’s special economic zone. Itochu will then procure the green ammonia for use as a marine fuel.

Front End Engineering and Design on the project is expected to begin this month, with Toyo, ITOCHU, and PT Pupuk Indonesia establishing a joint venture to oversee the project. The Final Investment Decision (FID) is expected in the first half of 2025 with operations commencing in 2027.

State-owned PT Pupuk Indonesia announced that it will invest more than $6 billion over the next five years to boost domestic fertilizer supply to improve the country’s food security (GM March 22, p. 31).  The company has been exploring a methanol plant in Aceh, the same region in which the JDA with ITOCHU and Toyo is developing the green ammonia facility.

NYK Line Completes Ammonia-Fueled Tugboat

Ammonia, Clean Ammonia, Green Ammonia, Japan, Low-Carbon

NYK Line, based in Japan, has announced the completion of its ammonia-fueled tugboat Sakigake. The vessel was completed by NYK, IHI Power Systems, and Nippon Kaiji Kyokai and is billed by NYK as the world’s first ammonia-fueled vessel for commercial use. It will be operated by NYK Group company Shin-Nippon Kaiyosha for a three-month commercial trial in Yokohama harbor and Tokyo Bay.

The predecessor vessel, an LNG-fueled tugboat of the same name, was completed in 2015. The conversion has been in development since 2021 with the retrofit taking place late last year.

NYK was recently included in a The Heads of Terms agreement with Sembcorp Industries, Sojitz Corp., and Kyushu Electric Power under which Sembcorp will produce green ammonia using renewable resources while Kyushu will incorporate the green ammonia into its power plants in Japan with the goal of reducing coal consumption. Sojitz will act as a business intermediary while NYK oversees the maritime transportation of the green ammonia (GM Aug. 23, p. 25).

JERA, Lotte to Develop Low-Carbon Supply Chain

Clean Ammonia, Japan, Low-Carbon, South Korea, U.S.

JERA, Japan’s largest power generation organization, has signed a joint collaboration agreement with Lotte Fine Chemical (LFC) of South Korea to develop low-carbon fuel value chains. Both companies will collaborate on three initiatives to accelerate the development of standardized commercial frameworks, to optimize each party’s ammonia portfolio, and to communicate with governments to establish and expand the low-carbon fuel value chain.

“As Japan and Korea strengthen their cooperation to achieve ensure energy security and building resilient supply chains for clean hydrogen and its derivatives, we encourage this agreement of JERA and LFC and look forward to further progress in these endeavors,” said Hiroo Inoue, Director-General, Energy Efficiency and Renewable Energy Department of the Natural Resources and Energy Agency.

JERA recently launched cooperative agreements with CF Industries for developing a low-carbon ammonia facility in Louisiana (GM April 19, p. 1) and with ExxonMobil for exploring the purchase of low-carbon ammonia from Exxon’s Baytown facility outside of Houston (GM March 29, p. 27). JERA also recently launched a demo co-firing ammonia with coal at its Hekinan Thermal Power Station in Aichi (GM March 15, p. 27).

Fertiglobe, HintCo Ink Green Ammonia Agreement

Clean Ammonia, Egypt, Green Ammonia, Low-Carbon

Fertiglobe officially signed a contract with German state-backed company HintCo for the delivery of up to 397,000 mt/t of green ammonia by 2033 from Egypt to Europe. This follows Fertiglobe’s win of the pilot H2Global auction this past July (GM July 12, p. 27).

First ammonia shipments are expected at European ports in 2027, with an initial shipment of 19,500 mt of green ammonia in the first year. The low carbon ammonia will be delivered at a price of €1,000/mt ($1,116/mt), including transport costs, from Fertiglobe’s existing ammonia plant in Ain Sokhna, Egypt.

The green hydrogen will be supplied from the Egypt Green Hydrogen project, developed by Norwegian renewables company Scatec in partnership with Fertiglobe and Orascom Construction.

“This is a significant moment for HintCo that proves progress is possible for the clean hydrogen market.,” said HintCo CEO Timo Bollerhey. “As exciting as this moment is, my team is already focused on what comes next: new tenders for both clean hydrogen purchase and sales agreements. Time is short, and we must build both infrastructure and markets rapidly and efficiently if we’re to avoid climate catastrophe.”

Kyrgyzstan, China Ink MoU for Fertilizer Plant

Asia, China, News Briefs, Potash, Russia

The Kyrgyz government and the country’s main agricultural co-op have signed a memorandum of understanding (MoU) with the China National Electric Engineering Company (CNEEC) for the construction of a urea and complex fertilizer plant, according to an Aug. 21 release in the national media outlet Kabar.

Details on the intended plant capacity and a commissioning date were not disclosed. The scope of the MoU is the construction of a modern fertilizer plant that will strengthen the country’s agro-industrial complex by providing farmers with high quality and affordable domestically produced fertilizers, reducing reliance on imports.

Kyrgyzstan, located in Central Asia, does not currently have any nitrogen, phosphate, or potash capacity and imports around 35,000 mt/y of fertilizers, of which approximately 25,000 mt/y is urea from the Russian Federation and neighboring Kazakhstan.

Brazil Fertilizer Plan Addresses High Gas Prices

Brazil, China, India, Natural Gas, News Briefs, Nitrogen, U.S.

Current natural gas prices in Brazil make the production of nitrogen-based fertilizers in the country “completely unviable,” Carlos Fávaro, Minister of Agriculture and Livestock, said on Aug. 27 at the 11th Brazilian Fertilizer Congress, according to S&P Global.

Fávaro said recent changes in the regulatory framework will boost domestic natural gas production and should reduce natural gas prices by half, however. S&P Global reported the current price of natural gas in Brazil at $14/MMBtu. The decision to allow direct market sales of gas from production-sharing fields will gradually decrease prices until 2030, Favaro said.

Natural gas prices are a point of legal dispute between state-owned oil and gas company Petrobras and Unigel, the struggling Brazilian chemical and fertilizer maker. Unigel earlier this year closed two nitrogen plants leased from Petrobras at Bahia and Sergip, blaming high natural gas prices (GM March 8, p. 34). Petrobras reportedly ended its contract with Unigel in June (GM July 5, p.  26).

Brazil is responsible for around 8% of global fertilizer consumption, ranking fourth behind China, India, and the US, according to S&P Global. The National Fertilizer Plan published by the Brazilian government states that more than 80% of the fertilizer used in Brazil is imported and costs $25 billion yearly, but the plan hopes to meet 45-50% of domestic demand with local products until 2050.

In the 1990s, Brazil was able to meet about 50% of its domestic fertilizer demand through local production, but a combination of increased demand and policies that favored imports over domestic production resulted in a significant decline in Brazil’s self-sufficiency in the sector. This shift was accompanied by the privatization of factories and a reversal of Petrobras’ involvement in the fertilizer industry after the 1973 oil shock, S&P Global reported.

ADNOC Progresses on Covestro Acquisition

ADNOC - Abu Dhabi, Germany, News Briefs

Abu Dhabi National Oil Co. (ADNOC) has largely completed due diligence on its planned bid for German chemical company Covestro AG, paving the way for the state-owned energy firm’s biggest-ever deal, people familiar with the matter told Bloomberg.

ADNOC could move forward with an €11.7 billion ($13 billion) offer for Covestro as soon as September, the people said. It has finished site visits to major Covestro plants as part of its in-depth confirmatory due diligence and hasn’t discovered any red flags, according to the people. 

ADNOC still needs final signoff from senior officials for the planned bid of €62 per share, which may take several more weeks, the people said, asking not to be identified because the information is private. Representatives for ADNOC and Covestro declined to comment. 

After more than a year of negotiations (GM Sept. 15, 2023), Covestro in June agreed to exchange information with ADNOC to help it firm up the prospective bid. ADNOC said at the time that a potential bid of €62 per share was its final offer, indicating it would not be raising any further after already bumping several times from its first proposal of €55 per share.

Shares of Covestro have risen 13% in the past year, giving the company a market value of about €10.3 billion.

Backed by tens of billions of dollars of oil money, ADNOC has been scouring the world for deals, Bloomberg reported. Chemicals are a big part of that push, as the company sees demand for products used to make goods such as plastics continuing to rise over the coming decades, while the energy transition is likely to slow oil demand. 

Port Strike Averted in India

India, News Briefs

Port employees’ unions in India have agreed to a new five-year wage deal with government officials, averting a planned nationwide strike scheduled to start on Aug. 28, according to Bloomberg.

The new deal halts a walkout that could have involved nearly 20,000 workers and brought widespread disruption to cargo operations at some of the nation’s busiest ports. Unions at India’s 12 major state-run ports have been negotiating with the government since 2021 to try to increase pay.

Under the newly agreed terms, unions accepted an 8.5% wage increase over five years, backdated to Jan. 1, 2022, said Narendra Rao, a Working Committee Member of the Centre of Indian Trade Unions.

P.M. Mohammed Haneef, President at All India Port and Dock Workers’ Federation, said management has agreed to conclude the proceedings of the wage negotiations panel within 15 days.

Ammonia

Ammonia, Eastern Cornbelt, India, Market Watch, Middle East, Northwestern Europe, South Central, Southern Plains, Tampa, U.S. Gulf, Western Cornbelt

US Gulf/Tampa:

The Tampa ammonia price for September was concluded at $530/mt CFR, up $55/mt from the August settlement of $475/mt CFR. An increase had been expected, fueled by firming ammonia prices in Europe and the Midwest, though some international contacts were surprised by the jump, citing seasonally low downstream demand and a generally balanced market.

The increase at Tampa pushed the NOLA barge market up to an indicative $482-$483/st FOB and the Caribbean price to $490/mt FOB.

Eastern Cornbelt:

Ammonia remained at $545-$560/st FOB in the Eastern Cornbelt, depending on location.

Western Cornbelt:

Ammonia pricing was unchanged at $545-$560/st FOB in the Western Cornbelt.

Southern Plains:

The ammonia market was quoted at $505-$515/st FOB terminals in Oklahoma and Kansas, depending on location and availability. Sources said the Verdigris, Okla., plant has been down since Aug. 15 due to a lightning strike, while production at Borger, Texas, was also rumored to be offline in late August.

Truck ammonia pricing out of Gulf Coast production points in eastern Texas and Louisiana was slated to firm to $480/st FOB in September, up from August’s $430/st FOB following the September Tampa ammonia settlement.

South Central:

Sources continued to report no ammonia offers for truck tons from El Dorado, Ark., Midway, Tenn., or Cherokee, Ala., in late August.

Northwest Europe:

Prices for imported ammonia in the region were stable at $550-$560/mt CFR with no new spot deals reported. Still, ammonia in the region is finding support from the higher Tampa September settlement at $530/mt CFR.

With natural gas stable, downstream demand still muted, and improved ammonia availability, price direction remains largely driven by sentiment rather than fundamentals.

India: 

No new tender has been announced by FACT after the company scrapped its previous tender. Ammonia prices into India have risen from the last-done $397/mt CFR. Sources noted current expectations in the $400-$405/mt CFR range, though nothing has yet been completed at that level.

Middle East: 

Arab Gulf producers reported contracts at $355/mt FOB, with talks for spot deals focused on $365/mt FOB.

First-half 2024 ammonia exports from Iran totaled 354,000 mt, Trade Data Monitor reported, up slightly from the 349,000 mt shipped in January-June 2023. India took 311,000 mt, for about 88% of the total. June exports were 84,000 mt, down from 86,000 mt in June 2023. Second-quarter exports were down about 3%, to 200,000 mt from the 206,000 mt shipped one year earlier.

Urea

Argentina, Black Sea, Brazil, China, Eastern Cornbelt, India, Indonesia, Market Watch, Mediterranean, Middle East, South Central, Southeast, Southeast Asia, Southern Plains, U.S. Gulf, Urea, Western Cornbelt

US Gulf:

NOLA urea trades during the week were reported at $303-$309/st FOB for August-September, down slightly from last week’s $303-$313/st FOB range.

Eastern Cornbelt:

Urea was quoted at $350-$370/st FOB in the Eastern Cornbelt, down $10/st at the bottom of the range, with the low confirmed out of spot Illinois River terminals. A similar range was also confirmed out of Ohio River terminals, with the Cincinnati market steady at $360-$365/st FOB in late August.

Western Cornbelt:

Urea remained at $340-$365/st FOB in the Western Cornbelt, with the low reported at Port Neal, Iowa. The St. Louis, Mo., market was quoted at $345-$355/st FOB in late August.

Southern Plains:

The urea market slipped to $360-$375/st FOB in the Southern Plains, down $10/st at the upper end of the range, with both the high and low confirmed at Catoosa/Inola, Okla., during the week.

South Central:

The urea market narrowed to $350-$370/st FOB terminals in the South Central region, with the low confirmed at Convent, La., and the high in Arkansas. Pricing at Memphis, Tenn., was reported at $360-$370/st FOB during the week, with the Owensboro, Ky., market pegged at the $355/st FOB level.

Southeast:

Urea pricing in the Southeast dipped to $360-$370/st FOB port terminals in late August, down $5/st at the low end of the range.

India: 

The National Fertilizers Ltd. (NFL) urea tender closed on Aug. 29. The tender documents called for the tonnage and price envelopes to be revealed on Aug. 30, though some traders speculated late in the week that NFL might delay releasing the information by a few days, as has been done in the past. As of press time on Aug. 30, NFL released only the names of the 23 participating companies.

Two producers were included among the participating companies, PIC and SABIC. Offers from these companies are expected to be on an FOB basis. Fertiglobe was listed as well, though it is unclear if the offer was made by the company’s trading or producing arm. OQ Trading, which represents Omani producer OMIFCO, was also included on the list. Offers from these companies typically act as indicators for where Arab Gulf producers would like the market price to settle.

Leading up to the tender, speculation picked up regarding how many tons NFL might take purchase, and at what price. Sources agreed NFL might 750,000-1 million mt, though price predictions for the tons varied widely.

While opinions differed on the possible price, sources agreed that an award would likely come at a significant discount to the previous tender’s $350-$365/mt CFR. Players largely focused on possible pricing in the $330s/mt CFR.

Some argued the price would land in the upper-$330s/mt CFR, potentially touching $340/mt CFR, while others put the likely price in the mid-$330s/mt FOB. Some even argued for offers in the upper-$320s/mt CFR.

One trader was blunt in his assessment. “Your guess is as good as mine,” he said.

Sources estimated that Russia has about 400,000 mt available for the tender, a similar level to that of Arab Gulf producers. Another 200,000 mt could come from traders holding shorts from North Africa and Southeast Asia. None of the producers appear ready to accept prices in the $320s/mt CFR, but do seem willing to discuss pricing in the upper-$330s/mt CFR.

There are also reports of Iranian material currently housed in Chinese warehouses for re-export, though sources said the cost for that urea would exceed the estimated tender price. The material was most likely purchased at $300/mt FOB from Iran, giving the tonnage a re-export price of about $330/mt FOB.

Traders speculated on the impact of various purchase scenarios. If NFL takes only 750,000 mt against an offered tonnage of 3-4 million mt, the market is expected to crash. If, however, NFL goes for the full 1 million mt and offered tons total in the 2-3 million mt range, sources expect to see a price rebound.

Adding to the mix, rumors are circulating that China may allow 500,000 mt to be exported during October, a timeline that would work for the tender’s Oct. 31 shipping deadline. If Chinese tons are indeed available, a lot of previous calculations will be tossed out the window.

There are questions as to how many tons Russian suppliers will provide. If the landed price into India is too low, Russian producers may hold back rather than risk netbacks falling too close to their breakeven price.

Black Sea:

The price range for prilled urea in the Black Sea region narrowed upward this week, to $300-$305/mt FOB.

Mediterranean:

Urea prices in the Mediterranean were stable, with new sales occurring within the existing $370-$375/mt CFR range. French and Italian buyers are momentarily on the sidelines as they remain focused on the harvest while sitting on some stocks, while Spanish buyers were more active around $370/mt CFR.

Southeast Asia:

No new granular urea deals were reported in the region despite September offers at $335-$340/mt FOB, as most regional markets are currently in the offseason. With no new granular tender ex-Indonesia, the high end of the range continues to reflect the $366/mt level last done by Pupuk in its earlier tenders.

Indonesia:

Some traders continue to hold out hope that Pupuk will call a selling tender soon. There is little chance of granular product being offered, some traders said, but prilled urea could find its way to the market.

Sources noted that a new NPK plant in Indonesia has increased the domestic demand for urea. The new plant will add 300,000 mt/y to the country’s existing NPK facilities, and sources added that existing plants have stepped up their production, from 80% to 85% of rated output.

The likelihood of a prilled urea tender remains strong, said one source. Prilled prices in the Southeast Asian market have begun to exceed that of granular due to the absence of Chinese material in the region. At the same time, domestic demand remains strong for granular tons but not prills.

In the absence of a tender, the last-done price for granular product from Indonesia remained at $366/mt FOB. This is likely much too expensive for the current regional market, however, where recent sales from Brunei at $340/mt FOB and Malaysia at $335/mt FOB have lowered pricing expectations for the area.       

Middle East: 

Sources reported the current Arab Gulf paper urea market at $325/mt FOB, at the upper end of expected netbacks from the India tender.

No new deals were concluded to move the public price from the low-$340s/mt FOB achieved in the last India tender. However, current offers from producers were reported in the mid-$330s/mt FOB against bids in the upper-$320s/mt FOB. With freight from the Arab Gulf to West Coast India pegged at $15-$16/mt, producers’ pricing ideas are too high. Even the market’s current bids are high compared to some of the prices estimated into India.

Arab Gulf producers are said to have about 400,000 mt available through October to be offered into the India tender.

Sources said the 100,000 mt of Iranian material shipped to Chinese warehouses for re-export will most likely find its way to Nepal and other regional Asian buyers. The cost to ship these tons to India under the NFL tender would most likely make the price too high.

The growing softness in the global urea market is impacting selling expectations in Iran. The government has dropped its $300/mt FOB price floor and is reportedly willing to accept $297/mt FOB, sources said. Bidding has reportedly been focused in the upper-$280s/mt FOB, however.

January-June urea exports from Iran stood at 2.8 million mt, according to Trade Data Monitor, a 35% increase from 2.1 million mt in first-half 2023. India led buyers with 1.3 million mt, Brazil took 499,000 mt, and Oman received 329,000 mt.

June exports of 538,000 mt were up 12% from the 481,000 mt shipped in the prior June, while second-quarter exports were reported at 1.5 million mt, up slightly from the 1.4 million mt shipped in April-June 2023.

Egyptian producers have once again gone silent following the market’s recent $345/mt FOB deal. European buyers are quiet and expected to remain so through the short-term, sources said. While producers are reportedly asking $345-$350/mt FOB for product, they are willing to talk with potential buyers about pricing in the low-$340s/mt FOB, players noted.

China:

Rumors that China could make 500,000 mt of urea available for export in October are being discounted by many in the industry. So far, said sources, the government has not indicated any intent to ease its restriction on urea exports.

The purpose of restricting exports has been to build domestic reserves and lower the price. Prices have moved lower, with sources indicating an estimated export price of $290/mt FOB. Stockpiles remain limited, however. One trader put current reserves at 500,000 mt, compared to a government preference to keep at least twice that amount on hand.

Brazil:

Granular urea prices declined 4.2% in Brazil to trade at $340-$345/mt CFR, a $15/mt decline from last week. Bids reported at $330/mt CFR failed to attract a seller.

While international players awaited the results of the Indian tender and the Brazil market focused on the 11th annual ANDA event, buyers found sellers willing to meet their bids. Other sellers held offers firm at $350-$355/mt CFR, however, expecting prices to rise on an expected imminent surge in seasonal demand.

Inland pricing for short- to medium-term supply was reported at $480-$495/mt FOB Rondonópolis amid steady-but-weak demand in the runup to soybean planting. Suppliers have been pushing for higher prices, particularly as the market awaits pricing from the India tender, while domestic buyers have continued to press for lower prices.

Argentina:

The Argentina granular urea market remained at a standstill as players await the government’s final announcement on reducing import tariffs on fertilizers from 17.5% to 7.5%, which will officially take effect on Sept. 2. Following the announcement, players predicted demand totaling 120,000-150,000 mt for September and October loading.    

Trade Data Monitor pegged urea imports at 411,000 mt through the first half of the year, a significant increase from the 172,000 mt received in January-June 2023. Algeria sent 136,000 mt, Nigeria added 110,000 mt, and Egypt shipped 67,000 mt. June imports were 131,000 mt, rising from 77,000 mt in June 2023. April-June imports were reported at 210,000 mt, a 46% increase from the 144,000 mt received in second-quarter 2023.