After looking over the numbers, sources say the best STC can hope for is 500,000 mt unless more suppliers are willing to lower their offering prices.
Asian sources say the most likely scenario to be worked out this week will be $309.90/mt CFR into East Coast ports and $312.50/mt into West Coast ports.
If the predictions come true, after this tender, India will still need at least another 1.5 million mt to complete the application season. Sources say any future tenders will end up showing higher prices.
The Chinese export window closes at the end of the month, leaving only the tons in bonded warehouses by that time available for export. Other sources of urea – Yuzhnyy, Iran and the Arab producers – all have higher pricing ideas.
The STC tender results showed that prices are moving up.
Even though Chinese led with the lowest prices in this tender, the Iranians held out for a few dollars higher.
Adding to the upward pressure on prices are tenders coming up by Bangladesh for 100,000 mt and a series of tenders from Pakistan for a total of 500,000 mt. The Bangladesh tender comes on the heels of a series of smaller tenders – 50,000 mt each – that have pulled some of the excess tons from Chinese ports. The Pakistan tenders call for delivery of the material by the end of the year.
Transammonia sent its regrets and did not participate in the tender.
Three companies Dragon Fertilizers, Dreymoor, and FertTrade were disqualified. The combined offers from the three companies totaled 220,000 mt but STC did not reveal the offering prices.
The State Trading Corporation (STC) of India pushed back the closing date of its urea tender by one day. The tender will now close Oct. 18 at 11:00 a.m., with the tender offers to be opened at 3:00 p.m. The postponement, said one trader, was in response to the EID holiday that ended at sunset Oct. 15.
Sources say that STC could take up to 1.5 million mt if the price is right. The new tender was needed after MMTC only took about 600,000 mt in its tender earlier this month.
Even with the MMTC purchases, India still needs about 2 million mt of urea before the end of the application season in February 2014. Shipment must start before Nov. 30.
NOLA granular urea dropped to as low as $275/st FOB in trading late last week. While this information was received prior to Green Markets deadline, it was erroneously not included in the Oct. 14 edition. Green Markets is correcting its Oct. 14 range to $275-$290/st FOB from the previously reported $283-$290/st FOB.
The State Trading Corp. of India called a urea tender to close Oct. 17. The new tender was needed after MMTC only took about 600,000 mt in its tender earlier this month. Even with the MMTC purchases, India still needs about 2 million mt before the end of the application season in February 2014. Shipment must start before November 30.
The shipping deadline gives STC the opportunity to pick up Chinese material stored in bonded warehouses or headed for the warehouses before the end of October. The export duty on urea goes up to 110 percent beginning Nov. 1. Sources say, however, any material either already in the warehouses by that date can be sold at the current lower rate. One source noted that even material not yet in the warehouse but committed to an offshore buyer by the end of the month could also qualify for the lower rate.
The other target for the STC tender is to get more Iranian urea. Between the two producing countries – Iran and China – urea prices have dropped dramatically in the past 10 months. Indian buyers have moved to take advantage of this decline.
Agrium Inc. this week confirmed that it is indeed eyeing the restart of its long-idled Kenai, Alaska, nitrogen plant. The company has been immersed in a reassessment of the facility this year, but in July downplayed (GM July 8, p. 1) the prospects of returning the plant to near-term production.
This week, however, the company, citing new gas discoveries in the area termed a restart a “no-brainer” if gas is available. Agrium would look to start up the newer of the facilities at Kenai, which would give it 657,000 mt/y of urea and 290,000 mt/y of net ammonia.
Agrium’s timeline calls for a final decision by the end of 2014, with a possible startup in second-half 2016.
Ukrainian urea producer Ostchem Holdings received a boost this week from Gazprom when the Russian company announced it would be cutting the cost of gas to Ostchem from $395 per thousand cubic meters ($11.50/mmBtu) to $260 per thousand cubic meters ($7.55/mmBtu).
Ostchem had some news of its own, announcing plans at IFA’s Kiev meeting that it plans to increase urea production capacity from 2 million mt/y to 2.5 million mt/y.
Potash Corp. of Saskatchewan Inc. has cut its guidance for third-quarter earnings to $0.41 per share, down from the previous $$0.45-$0.60 per share. The change primarily reflects lower than forecasted potash sales volumes late in the quarter as buyers continued to defer significant purchases amidst near-term market uncertainty. Additional discussion around third-quarter results, as well as full-year guidance will be addressed in the third-quarter news release and conference call Oct. 24.
