All posts by mickeybarb@charter.net

E.U. Seeks to Avoid Carbon Import Levy

Europe, News, News Briefs

The European Union (E.U.) has called on its international partners to impose a price on pollution, a move that could help them avoid a new carbon import levy proposed by the European Commission (E.C.).

The E.C. in June aims to propose a measure that would penalize emissions embedded in some products imported into the E.U., in sectors that could include fertilizers, steel, cement, and power, according to a Bloomberg  report, citing E.U. Economic Affairs Commissioner Paolo Gentiloni on March 23 during a conference hosted by the French government.

The so-called Carbon Border Adjustment Mechanism (CBAM) is part of the E.C.’s “Green Deal,” which targets Europe to reach climate-neutrality by 2050. The E.C. has repeatedly stated that the CBAM would be “an alternative” to the region’s existing carbon leakage measures.

While there have been positive climate signals in some countries over the past several months, there is the need to build on such a global trend to set up joint approaches with like-minded international partners, including introducing equivalent carbon pricing mechanisms, Gentiloni said, according to the report.

The new import levy would help avoid carbon leakage where producers move to regions with more lenient pollution regulations.

The risk of companies relocating their production outside Europe is set to grow amid increasing emission prices in the region, which have surged by 60 percent since November; on Feb. 12 they hit a record high of nearly €40 ($49) per mt of carbon-dioxide equivalent.

The E.C. is looking at various design options for the CBAM, but there is “some convergence” towards a tool that would operate like a mirror image of the E.U. Emissions Trading System (ETS), according to the report, citing Gentiloni. Under such a “notional ETS,” importers of emissions-intensive products would have to pay a charge linked to the price of allowances in Europe, home to the world’s largest emissions-trading system.

However, it is not proposed that importers will be subject to an adjustment that is higher than that which applies to domestic E.U. producers, according to the commissioner. The E.C. is also looking at possible ways to support less developed countries.

Haldor Topsøe, Nel Ink MOU for End-to-End Green NH3 and eMethanol Solutions

Ammonia, Methanol, News, News Briefs, Scandinavia

Haldor Topsøe, Copenhagen, and Norway’s Nel ASA have entered into a Memorandum of Understanding (MOU) with the intent to offer customers complete renewable electricity to ammonia and methanol solutions, the Danish catalysis company said on March 25.

Solutions will be based on globally leading technologies from the two companies – Nel’s alkaline and PEM electrolysis technologies, in combination with proven ammonia and methanol technologies from Topsøe.

Under the MOU, the Danish firm intends to supply license, engineering, proprietary hardware, catalyst, and technical service for its ammonia and eMethanol™ technologies, as well as system integration engineering. Nel intends to supply its alkaline or PEM electrolysis technology and proprietary hardware and subsystem engineering.

Green ammonia and eMethanol are both considered promising low-carbon transportation fuels and energy carriers.

Topsøe is currently engaged in several projects to produce green hydrogen, green ammonia, eMethanol™, and green fuels. An example is the Helios project in NEOM, Saudi Arabia, announced in July 2020, which includes the world’s largest ammonia loop (1.2 mt/y) delivered by Topsøe (GM July 10, 2020).

Kyrgyzstan Imposes Six-Month Fertilizer Export Ban

Asia, News, News Briefs

Landlocked Kyrgyzstan’s government has imposed a temporary ban on exports of mineral fertilizers, according to an Interfax report last week, citing the country’s Cabinet of Ministers. The move is aimed at ensuring the timely and full provision of mineral fertilizers for Kyrgyzstan’s agriculture sector, and also to prevent price increases for the agriculture sector during spring field work. The spring sowing season began on March 1.

Uzbekistan is the main supplier of fertilizers to the country, with an annual quota of 100,000 mt, according to the report, citing government ministers. However, there have been cases of the re-export of product to neighboring countries, according to the report.

The ban on exports has been introduced for a period of six months, with international transit and humanitarian aid excepted.

Ice Company Fined, Must Remedy Violations

Ammonia, News, News Briefs

J.P. Lillis Enterprises Inc., D/B/A Cape Cod Ice, a cold storage warehouse and ice manufacturing facility that stores over 10,000 pounds of anhydrous ammonia at its facility on the banks of the Seekonk River in Rhode Island, was fined $90,000 and placed on federal probation for three years by a federal court judge in Providence, R.I., on March 22 for repeatedly failing to implement a Risk Management Plan (RMP) to be executed in the event of an accidental release of anhydrous ammonia.

The facility, located in an industrial area adjacent to residential area, and in the vicinity of an elementary school, was assessed civil penalties by the U.S. EPA as far back as 2012 for failing to develop and submit an RMP, and since has repeatedly been found to contain equipment in need of repair to avoid a potential release of ammonia.

In addition, Cape Cod Ice will, within 90 days, engage a qualified independent ammonia refrigeration consultant to conduct an audit that (1) evaluates Cape Cod Ice’s compliance with the Clean Air Act and address deficiencies identified by the EPA, OSHA, and East Providence Fire Department and (2) includes a required maintenance inspection program.

Karnalyte N&K Projects Still on Table

Ammonia, News, News Briefs, Nitrogen, Potash, Saskatchewan

Junior fertilizer project developer Karnalyte Resources Inc., Saskatoon, said on March 19 both of its fertilizer projects in Saskatchewan – the Proteos Nitrogen Project and the Wynward Potash Project – are still under consideration.

In 2020, Karnalyte completed the preparation of a pre-feasibility study of Proteus and continued to prepare Wynyard for development.

Proteos is a proposed regional-scale nitrogen fertilizer plant to be located in central Saskatchewan, with a nameplate capacity of 700 mt/d ammonia and 1,200 mt/d urea. The  primary target market is local, independent wholesalers within a ~400-kilometre radius of Saskatoon, with a secondary target market of Midwest U.S. wholesalers near the Canadian border.

Karnalyte said while the Proteus prefeasibility study completed in 2020 is not sufficient to conclusively arrive at a project execution decision, it allows the company to determine whether the project should remain in consideration as part of the company’s future business strategy.

The prefeasibility study’s key conclusions included: the preliminary economic viability of the project approached company benchmarks; potential market growth of urea in Saskatchewan to approximately 2.64 million mt, up from current demand estimates of approximately 1.2 million mt, based on Government of Saskatchewan information; and the project’s implementation is expected to require three years following the preparation of a detailed project report and assuming a positive investment decision and commencement of construction by Karnalyte.

Karnalyte is encouraged by the results of the prefeasibility study, and similar to potash, nitrogen fertilizer prices have also been on a rally in recent months due to a supply/demand gap in the U.S. because of an increase in cropland planted areas and an increase in demand from China. Karnalyte will continue to seek strategic partners for Proteos and consider it with discipline and caution due to the significant capital expenditures required to move the project forward.

While the company was encouraged by the recent uptick in potash prices in the U.S., it said those for India and China were only slightly higher. It said it will continue to monitor the potash situation.

In 2021, the company plans to complete the strategic review that was initiated in 2020 and solidify a strategic direction for the company. It expects to announce the results of this review once the market sounding phase of the project is complete. It will also be necessary in 2021 for the company to spend time and financial resources in dealing with various court actions commenced against it (GM Feb. 5, p. 32).

Tessenderlo FY2020 Agro Adjusted EBITDA Up

Earnings, Europe, News, Specialty

Tessenderlo Group, Brussels, reported an 8 percent increase in adjusted EBITDA for its Agro segment for the year ended Dec. 31, 2020, to €125.6 million on revenues of €582.9 million, versus the prior year’s €118.5 million and €602.8 million, respectively.

The company said Agro’s overall revenue decreased by 2 percent when excluding the foreign exchange effect, but Agro’s Crop Vitality revenue remained stable last year as the lower second-half 2020 volumes could be offset by higher volumes in the first half.

The company reported volumes in the second half of the year were in line with expectations as part of the agro season in the U.S. shifted from the second half to the first half of the year, being impacted by weather conditions.

While NovaSource revenue remained stable throughout the year, Tessenderlo Kerley International revenue decreased due to lower SOP volumes.

The 8 percent rise in adjusted EBITDA for the Agro division excluded the foreign exchange effect. Agro’s Crop Vitality adjusted EBITDA increased on account of favorable market circumstances, while adjusted EBITDA of NovaSource and Tessenderlo Kerley International (TKI) remained stable.

However, second-half Agro adjusted EBITDA declined by 5 percent, to €41.1 million on revenue of €220.7 million, compared with the same prior-year period’s €47.8 million and €250.1 million, respectively.

Company-wide, Tessenderlo reported a 21 percent rise in full-year adjusted EBITDA to €314.6 million on revenues of €1.74 billion, up from 2019’s €267.7 million and €1.74 billion, respectively.

Tessenderlo anticipates a continued “high level of uncertainty” in the first half of 2021 due to the ongoing COVID-19 pandemic, where it said the development of customer demand and margin is exposed to increased risk.

The company expects that the 2021 adjusted EBITDA will be in line with the 2020 adjusted EBITDA. It said this guidance already takes into account the expected negative foreign exchange effect in 2021, following the weakening of the U.S. dollar at the time of writing.

The company is proposing not to pay out a dividend for the 2020 financial year.

Tessenderlo Kerley International to Build New Thio-Sul Unit at Geleen

Amthio, Europe, News, News Briefs, Specialty

Tessenderlo Kerley International (TKI) will build a new liquid fertilizer plant in Western Europe, Tessenderlo Group said on March 25.

Upon receiving the necessary permits and approvals, TKI will begin the construction of a Thio-SulR (ammonium thiosulfate) manufacturing plant in Geleen in the Netherlands. The plant is currently scheduled to start production in the second quarter of 2023.

Tessenderlo Group Executive Chairman, CFO, and COO Stefaan Haspeslagh told analysts at a company earnings call on March 25 the reasoning behind the choice of location for the new plant.

“The reason we want to build the plant at Geleen is because we have raw materials – including ammonia and sulfur – available in the vicinity. Secondly, Geleen is situated in an industrial chemical park where facilities are available, and thirdly, Geleen is situated in the middle of our market where we have an easy connection by truck, rail, and barge.”

Responding to an analyst’s question, Haspeslagh said the company would ensure it will take care that it has long-term supply contracts in place for the raw materials for the new Thio-Sulplant.

As previously reported, TKI is also studying a major Thio-Sul investment in the Eastern European/CIS region to support qualitative and productivity increases of agriculture in that region (GM Feb. 26, p. 38; Feb. 19, p. 37). Tessenderlo is evaluating whether Grodno, in western Belarus, would be a good location for such a plant.

“Now countries like Belarus and Ukraine are considered quite important for the future of Ag, and so we want to participate in making sure that productivity can increase by applying our products and that we can have a better quality,” Haspeslagh told analysts.

TKI and Finland’s Kemira Oyj have signed a long-term partnership agreement for SOP in late August last year (GM  Aug. 28, 2020). Under the terms of the agreement, Kemira will produce premium SOP fertilizers (both standard and water-soluble grades) at its plant in Helsingborg, Sweden, and Tessenderlo Kerley will market these products. The agreement was scheduled to become operational at the beginning of 2021.

No details were disclosed on volumes involved.

Haspeslagh told analysts only that the company is “very satisfied” with the contract because it adds some grades of product that Tessenderlo does not have in its portfolio.

Tessenderlo Group said it created a new growth unit, “Violleau” in the first quarter of 2021, to support the growth of organic agricultural solutions in Europe. This growth unit will be part of the Bio-valorization segment. The company bought the remaining share of the French Violleau company a couple of years ago. The French company transforms C2 material from Akiolis Group, a Tessenderlo company, into fertilizer.

Itafos Results Improve Despite Sulfuric Acid Supply Disruption

Canada, Earnings, News

Itafos, Toronto, reported improved results for fourth-quarter and year ending Dec. 31, 2020, despite a disruption in sulfuric acid supplies to its Conda, Idaho, plant (GM Feb. 19, p. 1; Dec. 18, 2020), as well as the idling of its production facility in Arraias, Brazil.

“Despite many challenges throughout 2020, we delivered financial results in line with our expectations,” said G. David Delaney, Itafos CEO. “During the fourth quarter we began to see improvements in both the agricultural and phosphate fundamentals, which we expect to benefit our 2021 performance.

“In addition to the improved phosphate fundamentals, we put plans in place during the fourth quarter to optimize the cash returns of the business by looking at capital-lite alternatives to capital spending and our continuation of the company wide cost savings plans,” he added.

The company reported a fourth-quarter net loss of $2.5 million on revenues of $75.1 million, compared to the year-ago loss of $88.5 million and $81.4 million, respectively. Adjusted EBITDA was $4.8 million, up from a year-ago loss of $1.6 million.

Adjusted EBITDA at Conda was $7.3 million, down from $8.2 million, representing an 11 percent decrease primarily due to lower cash margins per mt of P205 due to higher input costs, which was partially offset by higher realized prices. Production was 145,665 mt, up 4 percent from year-ago levels primarily due to the timing of the MAP+ production and higher APP production.

Itafos reported a full-year net loss of $62.3 million on revenues of $260.2 million, compared to the 2019 loss of $144.2 million and revenues of $339.4 million, respectively. Adjusted EBITDA was $15 million, up from a minus $3.2 million.

Adjusted EBITDA at Conda was $34.3 million, a 2 percent decrease due to lower production resulting from the disruption in sulfuric acid supply and lower realized prices, partially offset by lower cash costs. Conda production was 516,480 mt, representing a 10 percent decrease from 2019.

Itafos gave adjusted EBITDA guidance for 2021, with first-half $43-$48 million, second-half $37-$42 million and full-year $80-90 million. The company gave full-year maintenance capital expenditures of $20-$25 million, with the bulk of that – $16-$20 million – expected in the first-half. 2021 growth capex was put at $8-$13 million.

Ammonia

Ammonia, Black Sea, China, Eastern Canada, Eastern Cornbelt, India, Market Watch, Middle East, Northern Plains, Northwestern Europe, South America, Southeast Asia, Tampa, U.S. Gulf, Western Cornbelt

U.S. Gulf/Tampa:

Tampa ammonia prices jumped $100/mt for April, to $545/mt from the $445/mt CFR posted in March. Later in the week, NOLA barges were reported to have traded at $545/st FOB, up from $500/st FOB.

While NOLA ammonia plants were reported to have come back up, supplies were said to have been depleted by the longer-than-expected turnaround at the Waggaman, La., plant and the unplanned outage at Yara Freeport. Good agricultural and improved industrial demand have also been cited.

Eastern Cornbelt:

Ammonia prices continued to range from $570-$650/st FOB in the Eastern Cornbelt, with the low at Kingston Mines, Ill., and the high at Mount Vernon, Ind. Other terminal prices included $585/st FOB Lima, Ohio; $590/st FOB Huntington, Ind., and Illinois terminals at Albany, Peru, and Seneca; $600/st FOB Cowden, Ill., and Terra Haute, Ind.; $610/st FOB Trilla, Ill.; $620/st FOB Frankfort, Ind.; and $650/st FOB Henderson, Ky.

Western Cornbelt:

Ammonia prices in the Western Cornbelt in late March continued to be reported at $570/st FOB Palmyra, Mo., and $580-$615/st FOB terminals in Nebraska and Iowa, depending on location.

Northern Plains:

The ammonia market was reported in a wide range at $590-$675/st FOB regional terminals, depending on location, with the upper end confirmed at Velva, N.D.

There were reports of limited delivered tons in the $660-$680/st range in North Dakota, with the low for offers out of Leal, N.D., but sources said producers were reluctant to quote delivered pricing because “no manufacturer wants to deal with arranging freight.”

Eastern Canada:

No current pricing was reported for ammonia out of Courtright, Ont., in late March.

Black Sea:

Sources said given the current situation in the global ammonia market, the price in Yuzhnyy should be near $480/mt FOB. Sources said the real price is closer to $430/mt FOB, however, largely because of limited material for the spot market.

Most of the product going out of Yuzhnyy is under some form of long-term formula. The excess material that helps set the spot market is limited and does not appear often.

Middle East:

Arab Gulf material is limited. Sources said the last spot deal showed a price of $430/mt FOB, which one trader said fits with estimated netbacks from Far East deals. Quickly after that, the supply for spot business dried up. Demand remains strong in all buying areas, just as supply is limited.

The blockage of the Suez Canal by the Ever Giver could affect ammonia shipments. A cargo of 40,000 mt for India slated to arrive in early April has already been delayed.

India:

High prices in the global ammonia market are keeping the main buyers away from the market. Sources added that some of the phosphate producers are also holding off until the new fiscal year begins on April 1.

The change in the fiscal year could also mean a shift in how much producers will be able to charge for their product. Sources said DAP producers, in particular, are hurting because of high prices for inputs, including ammonia. One international trader said the producers might be more willing to step up and make some ammonia purchases if they get assurances that the plants will not have to run at a loss.

Northwest Europe:

Movement in Yuzhnyy and the Baltics is putting upward pressure on the Antwerp ammonia price. Sources noted a sale from a Baltic supplier at $320/mt FOB. This deal came after Koch reportedly settled on a $370/mt FOB purchase earlier this month. The shift has moved the range for the Antwerp price to $460-$500/mt C&F.

How much longer such a range will occur is up to the market. For now, sources said demand in Europe is strong and European production is not up to the task.

Southeast Asia:

Malaysia reportedly closed a deal into Thailand for a netback of $480/mt FOB. The price is the equivalent of $530/mt CFR into China and South Korea.

China:

The Chinese government released ammonia import numbers this week. According to Trade Data Monitor, February imports were recorded at 118,000 mt, compared with 67,000 mt in February 2020.

While February imports were up year-over-year, January-February imports this year were down compared with last year, at 124,000 mt versus 205,000 mt.

Colombia:

Yara recently procured a 3,000 mt lot at $550/mt CFR.

Urea

Black Sea, Brazil, China, Eastern Canada, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Nigeria, Northeast, Northern Plains, Urea, Western Cornbelt

U.S. Gulf:

Prompt granular barges were reported to be trading in the $378-$405/st FOB range, up from the week-ago $375-$400/st FOB.

Barge prices took off on March 25, moving up about $25/st FOB from earlier in the week and climbing to $405/st FOB, with sources reporting fears that near-term imports would be delayed. Quotes late in the day on March 25 were being heard at $410-$420/st FOB for the next round of prompt business.

Early week trades for all April were called $365-$380/st FOB.

Eastern Cornbelt:

The urea market was pegged at $430-$440/st FOB in the Eastern Cornbelt, up slightly from last report, with the low reported at Ottawa, Ill., and Cincinnati, Ohio. Pricing out of Michigan terminals ranged from $455-$463/st FOB in late March, with the low at Essexville and the high at Webberville.

Western Cornbelt:

While the low end of the regional urea market continued to be reported at the $425/st level FOB St. Louis, Mo., at midweek, Iowa sources quoted new values ranging from $440-$455/st FOB as the week progressed. The upper end was reported at Port Neal, Iowa, with sources expecting additional firming in the near term.

Northern Plains:

Sources reported slightly stronger urea pricing in the Northern Plains in late March. The market was quoted at a firm $425-$430/st FOB St. Paul, Minn., with delivered tons pegged at $475-$490/st in North Dakota, depending on time of shipment.

Northeast:

Urea prices were quoted at a firm $430/st FOB Fairless Hills, Pa., for March tons, with April-June pricing pegged at the $445/st FOB level at that location.

Eastern Canada:

Granular urea was quoted at C$602-$620/mt FOB in Eastern Canada, depending on location, up some C$40-$57/mt from last report.

India:

The RCF urea tender closed this week with 13 companies offering 1.926 million mt of product. RCF released the offering prices later in the week.The lowest prices offered represented an increase of about $95/mt from the December 2020 tender.

The lowest price for West Coast came from Agrifert Liven at $380.18/mt CFR for 50,000 mt. The lowest East Coast price was from Koch at $379.87/mt CFR for two cargoes of 50,000 mt each. As Green Markets went to press, RCF accepted these prices and put them forward to other traders for consideration.

Only two offers came from producers, with each offering 45,000 mt. The low offer came from Fertiglobe at $368/mt FOB. Sources said RCF countered Fertiglobe at $345.87/mt FOB. At press time, the producer has not responded.

Offering Company  Quantity Offered (mt) US$/mt CFR Discharge Port
Ameropa 51,500 385.00 Gangavaram
51,500 385.00 Krishnapatnam
51,500 385.00 Paradip
45,000 388.46 Vizag
51,500 388.46 Mundra
51,500 388.46 Pipavav
51,500 388.46 Rozy
45,000 388.46 New Mangalore
Continental   55,000 399.75 Kakinada-Gangavaram-Vizag-Krishnapatnam
45,000 395.00 Kandla-Mundra-Tuna
Dreymoor   104,000 390.47 Gangavaram
104,000 393.72 Pipavav
Gavilon   45,000 390.75 Mundra
46,000 387.75 Gangavaram
Swiss Singapore       46,000 389.10 Gangavaram-Paradip
46,000 389.15 Vizag-Krishnapatnam-Karaikal
46,000 389.20 Kamrajar-Kakinada-Tuticorin
46,000 392.25 Pipavav-Mundra-Tuna-Nemangalore-Jaigarth-Daheh-Kandla-Rozy
Agrifert Liven 50,000 380.18 Kandla-Mundra-Tuna-Rozy L1 WCI
Samsung         50,000 386.50 Gangavaram
50,000 392.50 Mundra
45,000 392.50 New Mangalore
90,000 394.50 Pipavav
45,000 387.50 Krishnapatnam
Amber   65,000 380.79 Gangavaram-
381.49 Krishnapatnam-Karaikal-Kakinada
65,000 384.49 Mundra-Pipavav
Koch   100,000 379.87 Gangavaram-Krishnapatnam-Vizag L1 ECI
100,000 385.60 Mundra-Kandla-Pipavav
Transglobe     50,000 386.00 Krishnapatnam
50,000 384.00 Gangavaram
50,000 391.00 Pipavav
Keytrade   45,000 384.76 Gangavaram
384.76 Kakinada-Krishnapatnam
Offering Producer Quantity (mt) US$/mt FOB
Fertiglobe – L1        45,000 368.00
Muntajat 45,000 380.00

The first tender of the year was called earlier than usual, as tenders in the past two years were called after the beginning of the fiscal year in April. The early calling underscored the need for urea, said one trader.

The tonnage offered also exceeded the totals in 2019 and 2020. The April 2019 tender came in with offers of 1.1 million mt at a final price of $251-$262/mt CFR. The April 2020 tender had 1.7 million mt offered at $252-$258/mt CFR.

Going into the tender, sources expected RCF to take about 1.2 million mt, with some predicting as high as 1.5 million mt. In the end, the buyer has accepted offers from 11 companies for a total of 1.4 million mt.

Offering Company Tonnage (mt)
Ameropa 354,000
Koch 150,000
Liven 50,000
Amber 130,000
Keytrade 45,000
Continental 45,000
Swiss Singapore 184,000
Dreymoor 104,000
Gavilon 45,000
Transglobe 100,000

Producers in China and the Arab Gulf are said to be pushing back against the estimated netbacks of $353-$356/mt FOB for China and $355-$357/mt FOB for the Arab Gulf. Both groups of producers want prices in the $360s/mt FOB.

Sources said producers could have gotten their wish earlier in the year, but the recent run-up in freight prices is causing greater pushback from traders and buyers. Sources now put the freight from China to India’s East Coast at $25-$26/mt and from the Arab Gulf to the Indian West Coast at $22-$24/mt. These rates reflect dramatic increases from previous sales.

India is not the only buyer pushing back. Sources said the global increase in freight is causing a general effort by buyers to reduce the netback to the producer, in the knowledge that little can be done about the transportation costs.

The buyer faces an additional problem. Under the terms of the tender, shipment must be started by April 28. If awards are issued to a trader handling CIS material, there is no guarantee that the Suez Canal can be cleared in time. Some media reports said it may take more than a month to float and remove the stricken vessel. Facing that situation, the trader may have to decline the bid from RCF, leaving the Indian buyer short at least 100,000 mt.

China:

The netback from the RCF/India urea tender puts the price at $353-$356/mt FOB. Some sources said prills are being quoted at $10/mt less.

For the producers, the estimate is a mixed blessing. Earlier this month, deals in the $340s/mt FOB were under discussion and some were concluded, according to sources. Now the price is about $10/mt higher. However, producers were hoping to see final prices in the $360s/mt FOB as a result of the tender.

Nailing down transportation to move about 600,000 mt out of Chinese ports is not difficult. Earlier in the month, sources said about 10 panamax vessels were reportedly booked to show up at Chinese ports between now and mid-April. Sources said all that is needed are a few more large ships, and the estimated 700,000 mt from China for the Indian tender could be covered.

The issue is the freight price and finding the extra ships. Transportation costs have jumped up. Sources now peg the price from China to the Indian East Coast at $25-$26/mt. To meet the $380/mt CFR price, this means the netback has to be in the $350s/mt instead of the hoped for $360s/mt FOB.

Loading the material could also be an issue. Sources reported a number of ports are still under COVID-19 restrictions. At least one port is reportedly still shut down because of the virus, but sources said it should open soon. In other cases, the ports have limited crews available to discharge and load vessels. The slower operating times at the ports mean there could be increased traffic congestion at the ports.

Production is reportedly strong enough that if all the transportation logistics can be worked out and a final price is acceptable, the Chinese producers should not have a problem meeting the demand from India.

Chinese exports in February were reported at 143,000 mt, compared with 149,000 mt in February 2020, according to Trade Data Monitor. January-February exports of 435,000 mt were also down from 515,000 mt during the same period last year. The downturn was seen as a result of the extended Lunar New Year holiday in February, and due to the government encouraging producers to ensure sufficient stocks for the domestic market.

Buyers in February were limited. The single largest buyer was Chile at 49,000 mt, followed by South Korea at 39,000 mt.

Indian imports of Chinese urea for January were at 214,000 mt, but only a few hundred in February, indicating the lack of a tender to draw tons.

China Urea Exports
Partner Country January-February (mt)
2020 2021
World   514,915   434,525
India   206,989   214,302
South Korea   112,529    81,919
Chile     3,608    51,651
Japan    26,007    27,706
Mexico    29,628    18,268

Middle East:

Arab Gulf producers were disappointed by the estimated netback from the RCF/India tender. To make matters worse, the Indian counterbid was even lower.

The estimated netback from the tender, based on trader offers, was put at $355-$357/mt FOB. The lower offer of $368/mt FOB from the two producers participating in the tender was counterbid at $345.87/mt FOB by RCF. Sources said they did not expect to see the producers accept that price.

Sources expect about 300,000 mt from the Arab Gulf to be awarded to traders. Sources said the most likely two companies getting the awards will be Ameropa and Swiss Singapore, both of whom have large contracts to sell OMIFCO product. If these two companies are awarded just the tons they offered for the West Coast, sources said the 300,000 mt will be easily met.

The issue will be if the traders can secure the necessary freight at a rate that does not put pressure on producers to go even lower. Sources said the current freight rate to the Indian West Coast from the Arab Gulf is now in the low-$20s/mt, where just a month ago quotes were sub-$20/mt.

The rapid rise in freight costs has forced a lot of traders to put pressure on the producers to lower their netbacks so that existing contracts can be covered without sustaining a loss. Sources said producers were hoping that their prices would be able to stabilize in the $360s/mt FOB because of the Indian tender. One trader said they may have to settle for the mid-$350s/mt FOB, however.

The price of Egyptian urea remains steady at $400/mt FOB. The steady rise in price and strong demand from Europe ensured that Egyptian producers would not be pressured to meet lower price expectations for the Indian tender.

Egyptian sources said none of their shipments appear to be affected by the blockage of the Suez Canal. Shipments from the east side of the country are going to Asian buyers, and material from the Mediterranean side are bound for Europe.

The closure of the Suez Canal will impact some cargoes from the Gulf region. Sources are reporting Iranian urea bound for Turkey will be delayed as a result of the blockage.

Last year, Turkey imported about 510,000 mt of urea from Iran, according to Trade Data Monitor. January imports were at 74,000 mt. February numbers have not yet been released.

Black Sea:

Sources said about 100,000 mt from Yuzhnyy might be in play in India. With a current freight rate of $42-$45/mt, the netback to Yuzhnyy is pegged at $335-$338/mt FOB.

Material bound for India from the Black Sea will have to pass through the Suez Canal. Media reports provide various timelines for when the canal will be freed from the obstruction caused by the Ever Given. The RCF tender documents mandate that shipping must begin by April 28. Sources said they hope the canal – and the ever-building backlog of waiting vessels – will be cleared in time to handle ships coming from Yuzhnyy to supply India.

Indonesia:

A new sales tender was called this week for 30,000-45,000 mt of granular urea to be closed March 29. Shipment of the product is for May. Sources said the reserve price is $340/mt FOB.

The reserve price is about $20/mt below the last done business. Sources suggested the move was to encourage more participation in the tender.

An award of 45,000 mt to Keytrade at $360/mt FOB earlier this month seems to have made an appearance in the RCF/India tender. Sources said with freight rates below $20/mt, the Indonesian cargo is well suited for India.

Another award of 45,000 mt to Eurochem did not show up in the tender. Sources speculated the material is bound for Australia.

Nigeria:

Dangote is firing up its urea and ammonia plant in the Lekki Free Trade Zone, about 50 km east of Central Lagos. In an email to the media, the company said test runs started this week after tests were completed on the central control room, the bulk storage areas, and the cooling towers.

The US$2 billion plant has a rated capacity of 3 million mt/y of urea and ammonia. The goal is to make Nigeria self-sufficient, to provide adequate fertilizer to neighboring countries, and to export what is left to the world. Sources reported that potential buyers in Brazil are already lining up to secure the export tons.

Early this week, Dangote Group President Aliko Dangote said operations would begin at the plant in the first week of April, Nigerian media reported.

Brazil:

Urea prices tightened in Brazil as traders and buyers remained unsure of what would happen when prices in the RCF/India tender were released.

Sources reported the price at Paranagua moved to $405-$415/mt CFR, bringing up the lower end of the range. At the same time, buyers were bidding at $395/mt CFR, apparently hoping to secure some material before prices moved up as a result of higher freight rates and India absorbing more than 1 million mt of urea from the global market.

The inland price at Rondonopolis dropped as buyers took a break while waiting for word from India. Sources said the new price from local warehouses was at $465-$540/mt FOB. At Sorriso, the price range widened to $480-$530/mt FOB ex-warehouse.

Brazil Urea Prices
Terminal/City US$/mt FOB ex-warehouse
Week ending 03/19 Week Ending 03/26
Rondonopolis 475-578 465-540
Sorriso 503-508 480-530