Now with new demand in India and Asia picking up and the Iranian deal, the new netback in the middle of the Gulf is now estimated at $175-$180/mt FOB.
One source noted that the Iranian price reflects a general tightness of material in the Gulf.
When all of the business in the area is taken into account, say sources, the price range in the area is $180-$200/mt FOB.
Black Sea: Producers are still shut down, say sources. Even with natural gas once again flowing, sources say the price remains too soft and the market too unstable for production to kick back in right away.
Sources also report that even if the plants were able to turn out tons, getting the cargoes loaded would be difficult. Maintenance work in the port of Yuzhnyy is making loadings difficult if not impossible, say industry sources.
At least one deal was reported at $200/mt FOB. This price, said one observer, confirms the higher end of the market. With the Middle East moving up, some demand picking up, and a shortage of tons in Yuzhnyy, sources are convinced higher prices will be coming out of the Black Sea soon.
For now, the market is still hovering around the $200/mt FOB level, with sources calling the range $190-$200/mt FOB.
Western Europe: The best bet on pricing now depends on what people are saying about the Baltic and Black Sea prices. The two markets are showing a difference of $15-$20/mt, about where it usually is for most markets. By all normal calculations that would put the delivered price into Europe at $240-$250/mt C&F.
UREA
U.S. Gulf: Early in the week sources said $305/st FOB was done for a prompt granular barge. However, by Thursday, everyone was honing in on the $300/st FOB mark for new seller offers and trades. Buyers were reportedly bidding $292-$295/st FOB.
The erosion was blamed on a couple of factors – lower corn prices and lower prices at Yuzhnyy. Sources also noted that an import vessel was due in soon, so there was speculation that buyers were working particularly hard to pull prices down. Still, in Catoosa and Inola, sources said product was at a premium, with prices expected to continue going up after the region thawed out from a recent ice storm. Sources said expectations are that the Koch Enid plant will continue to remain down for a while.
Eastern Cornbelt: The granular urea market was pegged at $355-$365/st FOB in the region, reflecting another slight increase from the previous week.
Western Cornbelt: Granular urea was generally quoted in the $355-$365/st FOB range in the region last week. The Catoosa/Inola market in Oklahoma was reported at $350-$365/st FOB with low inventory. Although not confirmed directly by the company, several sources said Koch’s Enid, Okla., urea plant is expected to be down through March, while ammonia and UAN production at the site is reportedly running.
Northern Plains: Granular urea pricing was quoted at $385/st DEL in North Dakota for prompt tons out of Canada, with spring prepay quoted at the $415-$425/st DEL level. The urea market FOB the Twin Cities was tagged at $360-$370/st FOB.
Great Lakes: The granular urea market was up from last report at $360-$390/st FOB, with the low in Wisconsin and the high reflecting the published price to the dealer in Michigan.
Northeast: Granular urea was quoted at $350-$360/st FOB Baltimore and Philadelphia, with the upper end also reflecting the dealer price FOB Lancaster, Pa. Some sources said suppliers were eyeing the $370/st FOB mark for new business, while others speculated the deals could still be had at previous numbers at the $340/st level in Philadelphia.
Black Sea: Urea plants are back on line – unfortunately for the producers. Sources report efforts to raise the price that seemed to be working a couple of weeks ago have now collapsed.
Producers and buyers were talking about breaking the $300/mt FOB level at mid-January. To Asian sources, it now looks clear that the area will start February with sub-$300/mt FOB prices.
Producers are asking $295/mt FOB, but no one is biting. At the same time, buyers are looking at $275/mt FOB and being rebuffed.
Sources currently peg the market at $280-$290/mt FOB.
While many in the industry hope to grab tons just at the nadir of the market, no one is ready to place a bet as to where that point will be.
The dynamics for a price increase are falling into place, said one Asian trader.
China will impose a 110 percent export duty on its urea effective Feb. 1. At the same time, India and Pakistan still need to buy large quantities of urea.
The Middle East is comfortably booked for the next month or so.
Put all that together, say industry sources, and the Black Sea price has to move up.
A major problem with getting higher prices, however, is that Latin American buyers are sitting things out right now. Likewise, India is comfortable enough with its past purchases to sit by and let storage reserves build until producers are desperate to sell.
Even Pakistan might pull out – despite its dire need for urea – if the price offers in its Feb. 2 tender are too high. Sources point out TCP already scrubbed one tender this year because of an apparent dislike of the offering prices.
Middle East: Sources say producers are not fully booked, but comfortable enough that they don’t have to bow to pressure from buyers to lower prices.
Contract demand from Asia and North America is providing enough business to keep the plants and ports busy.
At the same time, however, a softening market from the Black Sea is providing enough downward pressure on prices to ensure no increase.
Bangladesh: The Bangladesh government released the money necessary for BCIC to issue awards to a number of companies from the Dec. 30 urea tender. Sources say the company will be taking a total of 150,000 mt, split between granular and urea, to the ports of Chittagong and Mongla. Winners include Ameropa, Gavilon, Wilson, Toepfer, and Bulktrade. Sources say the prices ranged from $301.22/mt bagged CFR for prill to $314.20/mt bagged CFR for granular. The awards came with just a couple of days to spare in the validity period.
The government has been issuing statements to the media in the past few weeks that growing concerns about a pending urea shortage were unwarranted. In a statement issued Jan. 26, the finance minister announced the release of the funds necessary to purchase the urea.
Industry observers figure BCIC will now end its urea purchases for this season.
Pakistan: The industry is waiting to see what happens Feb. 2 when the TCP tender closes. The buyer had scrapped its January tender when offers showed a jump of $80-$90 from the December tender.
With rumors of an Indian tender still circulating, TCP may still face higher prices than they want to admit. Sources point out that the Middle East suppliers are comfortable enough that they do not have to be aggressive in their pricing ideas if they participate in the tender.
China urea is out of contention because the 110 percent export duty takes effect Feb. 1.
And lastly, that leaves the Black Sea as the primary source for large quantities that can be delivered in a reliable manner.
The reduction of a source of product to one source, say observers, is a recipe for a price increase.
In the meantime, the local press continues to report that farmers protest the shortage of urea. A policeman was reportedly injured in a clash with angry farmers, who took away hundreds of urea bags from a sale point at Punjab.
India: The industry is still watching this country closely. Earlier sources had figured the government ministries had come to an accord on how much they were willing to pay for urea under a new tender. Then, when the Pakistan January tender results were published and it was clear producers were going for an increase of at least $80/mt, the bean counters went back to work.
Shortly after the TCP results were released, the buyer scrapped the tender and called a new one to close Feb. 2.
In the meantime, the Indian buyers were working overtime trying to figure out what the scrapped tender meant and how they could avoid a similar push in prices.
Sources say India is in better shape than Pakistan because of purchases MMTC, IPL, and STC made late last year. Reportedly, supplies are sufficient to get the country well into the application season. More tons will be needed near the end of the season. By then, say sources, other major buyers will have stopped taking tons. This could lead to a build-up of material in the producers’ warehouses.
India still needs urea and will buy. The results of the TCP tender may help determine how soon the next purchasing tender is issued.
China: All was quiet on the fertilizer front in the Middle Kingdom as China celebrated the coming of the Year of the Ox. All last week most of the country’s industries and ministries were shut down as part of the New Year’s celebrations. The result of a lack of business activity in the country was a sure sign to the industry that Beijing was willing to let the export duties jump as planned Feb. 1. The new duty on urea will be raised to 110 percent from the current 10 percent.
Sources add that the rules as previously laid out mean any urea leaving the ports after midnight Feb. 1 will be assessed the higher rate. The regulations do not allow exemptions for material in the warehouses waiting for a ship or tons on rail cars heading for the port. The urea must have been on a ship and heading to a known destination by the end of the month to qualify for the lower rate.
NITROGEN SOLUTIONS
U.S. Gulf: Price ideas continue to be called in the low $200s/st FOB.
Eastern Cornbelt: UAN-32 pricing to the dealer was quoted at $275-$285/st ($8.58-$8.91/unit) FOB regional terminals, up slightly from last report.
Western Cornbelt: The UAN-32 market continued to be quoted at $280-$290/st ($8.75-$9.06/unit) FOB regional terminals to the dealer.
Northern Plains: The UAN market was tagged at $8.93-$9.25/unit FOB regional terminals, with delivered UAN-28 quoted at the $265/st ($9.46/unit) level in North Dakota for prepay tons.
Great Lakes: UAN was pegged at $8.75-$9.25/unit FOB regional terminals to the dealer.
Northeast: Sources quoted slightly higher prices for UAN-30. The dealer market was pegged at $260-$270/st ($8.67-$9.00/unit) FOB Baltimore and Philadelphia, with the upper end of that range also quoted out of river locations in Delaware. In upstate New York, UAN-32 pricing to the dealer was quoted at $310/st ($9.69/unit) FOB terminals for prompt tons, with prepay pegged at the $10.00/unit FOB mark.
AMMONIUM NITRATE
U.S. Gulf: Prices remain hard to gauge. Sources said last week that price ideas may have started to firm at NOLA as inland prices have been strong. Product for new sales was reportedly being quoted at $235-$250/st FOB.
Western Cornbelt: The ammonium nitrate market was pegged at $270-$300/st FOB in the region. Sources also quoted the Catoosa/Inola nitrate market at the $270/st FOB mark last week.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was tagged at $150-$175/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate pricing was reported at $150-$175/st FOB to the dealer last week.
Northern Plains: Dakota sources said a granular ammonium sulfate fill program at $160/st DEL in the region was just finishing up, with new postings slated to take effect last week. One source talked of a $205/st DEL level at midweek from one supplier. The market in Minnesota remained as low as $150/st FOB last week, with reports of a “little bit of a run” on product at that level.
Great Lakes: Granular ammonium sulfate was quoted in a broad range at $150-$215/st FOB, with the low reflecting Midwest postings from Honeywell.
Northeast: The granular ammonium sulfate market was quoted at $158-$160/st FOB and $190-$200/st DEL in the region last week.
PHOSPHATES
Central Florida: The market seemed to have found a bottom last week, but cold weather appeared to slow action in the domestic markets. No new spot, prompt sales were made, but deals using formula pricing were continuing.
Meanwhile, PCS Sales’s plants at White Springs and Aurora were not producing, and Mosaic was running around one-third of capacity last week. CF was apparently still operating, and raised its MAP differential to DAP from $10/st FOB to $20/st FOB.
TFI’s conference in San Diego begins Feb. 2. One big question was whether deals would be made during the meeting.
Both Mosaic and PotashCorp settled their first quarter sulfur contract prices down $150/lt, which brought the new price to an even $0.00/lt. However, considering the current rates of production, it may not really mean that much of a savings to phosphate producers. Ammonia prices were likely to increase, at least somewhat for the next month.
One source said dealers appeared to still have high inventories left over from the fall, but may soon begin refilling or topping off bins to avoid running out during the spring season. If buying begins within the next couple of weeks transportation should not be a problem, but if that does not happen until March, railcars may be hard to find.
The Central Florida DAP price range was dropped a bit to $305-$315/st FOB, based on recent sales. CF was said to be asking $310/st FOB for DAP and $330/st FOB for MAP. PCS Sales, which had been holding at $1,070/st FOB, withdrew its published price entirely, because its plants were no longer in operation. Mosaic had no posted price for Central Florida, but was said to be selling for as low as $305-$310/st FOB. The lowest prices were for big buyers, while dealers could expect to pay as much as $50-$60/st FOB more. The most recent price from Agrifos was $350/st FOB for trucks $340/st FOB for rail shipments.
U.S. Gulf: Cold weather and winter storms slowed but did not stop activity on the river system last week, and those problems should begin to abate during the next few weeks if the weather improves.
The USDA’s corn estimate was another factor in slowing sales, said sources.
The NOLA DAP barge market seemed to have found a real range by last week, which might encourage dealers to begin ordering. Many have been hesitant, after the price soared last year and then plummeted the last half of the year.
Phosphate plants around the country continued to either curtail production or shut down entirely. Mosaic’s Donaldsonville plant was operating just enough to avoid a shutdown, but the nearby ammonia plant was not operating.
Sales were made early in the week at $310/st FOB and later as high as $320/st FOB, in addition to formula-based deals. CF increased the difference from what it charges for MAP compared to DAP by $10/st FOB, which brought its prices to $310/st FOB for DAP and $330/st FOB for MAP.
The NOLA DAP barge price range last week was based on the actual sales, which ranged between $310/st FOB to $320/st FOB, with a few in between.
Eastern Cornbelt: DAP pricing to the dealer was reported at $360-$425/st FOB, with the low out of river terminals and the upper end out of inland warehouses to the dealer. MAP was $10/st higher than DAP out of most locations. 10-34-0 remained in a broad range at $650-$900/st FOB.
Western Cornbelt: Out of regional warehouses, the DAP market was quoted at $355-$375/st FOB to the dealer, with MAP $10/st higher. The 10-34-0 market remained at $550-$675/st FOB in the region, with the low in Nebraska and the upper end in Iowa.
Northern Plains: The DAP market was pegged at $360-$370/st FOB the Twin Cities, with MAP $10/st higher. In North Dakota, sources quoted delivered MAP at $435/st for prompt tons and up to $450-$460/st DEL for spring prepay.
10-34-0 pricing covered a wide range, from $565/st DEL in North Dakota for prompt material to $650-$675/st FOB in Minnesota for prompt or spring prepay tons.
Great Lakes: Interest in phosphates was low, but sources said they do expect some spring demand, and that could result in logistics issues if growers and dealers put off commitments until the last minute. DAP was quoted in a broad range at $370-$435/st FOB regional warehouses to the dealer, with the low reported in southern Wisconsin and the high in Michigan. MAP was $10/st higher than DAP.
10-34-0 remained in a broad range at $650-$950/st FOB to the dealer, with the low in Wisconsin and the upper end quoted in Michigan for very limited tons.
Northeast: The DAP market was quoted in a broad range at $375-$442/st FOB warehouses to the dealer, with MAP at $385-$457/st FOB, depending on location and supplier. One Delaware source also quoted delivered DAP in the low-$400s/st from North Carolina.
No current prices were confirmed for 10-34-0 in the region, and sources said product was tight due to phosphate production curtailments. In December, PCS idled its DAP and DFP feed plants in Aurora, N.C., and its sulfuric-acid, phosphoric-acid, purified phosphoric-acid, and MAP operations will continue at reduced rates from Jan. 15 through the end of February. “Until Aurora opens their plant up again it’ll be a difficult market,” said one source in reference to 10-34-0 and 11-37-0 pricing in the region.
Pacific Northwest: J.R. Simplot confirmed last week that its Pocatello, Idaho, phosphate plant was in the process of returning to full production, while its Rock Springs, Wyo., plant was still undergoing some curtailment.
U.S. Export: PhosChem, which had been out of the market for months, made a couple of sales last week, both at $358/mt FOB. One was relatively small to Peru – 6,000 mt – while the second, 25,000 mt, was into Vietnam. Sources said another deal was done on a formula basis to Australia, but the amount and exact price were not available.
Business and interest picked up after India announced a week earlier that it had purchased 1 million mt of DAP, most likely from Russia. Offshore customers generally begin seeking phosphate supplies around this time of year, which will help ease the burden of high inventories.
Based on the most recent sales, the export DAP price range increased but narrowed to a flat $358/mt FOB. Most sources say to expect business to increase during the next few months.
Pakistan: DAP demand in the country will surge 30 percent and require about 1 million mt of DAP versus 755,000 mt in 2008, according to S. Aamir Ahsan, CFO of Fauji Fertilizer Bin Qasim Ltd. (FFBQ), the country’s only DAP producer. He said farmers need to maintain the depleted urea/DAP applications in the soil and take advantage of low DAP prices. Ahsan added that Pakistan is still sitting on high inventory of over 366,000 mt of DAP and would not import it during the first quarter.
The FFBQ’s urea plant has been down for regular maintenance but is expected to come back up during the first week of February for urea, but DAP will take longer to come up. Ahsan put FFBQ DAP inventories at 174,000 mt. He also urged the government to expedite the release of DAP subsidies so that the company could meet its financial obligations.
Ahsan also expressed concern that phosphate rock prices have not fallen in line with other commodity prices and said they should come down so as to make an equilibrium with DAP prices. Otherwise, continued DAP production will not be viable and DAP plants will close.
POTASH
Eastern Cornbelt: Potash was quoted at $720-$800/st FOB regional warehouses, depending on grade and location. One Illinois source pegged the common dealer range at $740-$780/st FOB last week, but said there was no business to test the market.
Western Cornbelt: Sources continued to quote potash out of regional warehouses in the $700-$750/st FOB range to the dealer, depending on grade and location. Interest remained very low. “It’s an ugly situation,” said one source. “Farmers are cutting back and dealers put way too much in.”
Northern Plains: Potash pricing FOB Saskatchewan mines remained at reference levels of $767/st FOB for standard, $780/st FOB for soluble, $772/st FOB for granular, and $780/st FOB for white granular. Out of regional warehouses, the market was quoted at $780-$840/st FOB, depending on grade and location. Delivered potash in North Dakota was pegged at $830-$850/st.
Great Lakes: There were reports of dealers in the region positioning nitrogen for spring demand, but interest in potash remained low. “It’s like pulling teeth to get someone to look at potash,” said one Michigan source. “They just laugh at the price.”
That was reportedly true at the retail level as well. “The last round of [retail] potash buying was when it was in the $500-$600 range, but they are not going to pay $900 for potash,” said one contact. “They’ll just cut back. I wouldn’t be surprised if it’s less than 25 percent of normal.”
Potash pricing to the dealer remained at $840/st FOB in Michigan for red granular tons, with white granular potash referenced at $848/st FOB. Wisconsin sources reported brokered potash tons for as low as $780/st FOB, with rail-delivered potash referenced at the $844/st level from producers.
Northeast: Potash pricing from producers was quoted at $850/st DEL for red granular, $858/st DEL for white granular, and as high as $920/st DEL for soluble potash in some parts of the region. From secondary sources, the potash market was reported at $780-$850/st FOB in the region last week.
Saskatchewan: Agrium confirmed last week that while its potash mine will continue to operate at reduced rates, it has pushed back its layoff notice to employees from Feb. 10 to March 11.
Russia: Uralkali recently announced its production results for December 2008 and the 12 months of 2008. In 2008 Uralkali reduced its annual output of potassium chloride. The cut in production was a result of the current adverse situation in the world market for potash fertilizers, fueled by the global financial downturn. The softened demand for potassium chloride in a number of markets necessitated a considerable reduction in the company’s output in November and December 2008. In December 2008, Uralkali produced around 129.9 thousand mt of potassium chloride, which is a 3.5 times decrease on December 2007 (around 456.6 thousand mt). The company’s overall output in 2008 was around 4.8 million mt, a 6.4 percent decline on 2007 (around 5.119 million mt).
Uralkali says it is beginning to implement a program aimed at reducing its consumption of various types of energy. The program will be carried out in 2009-2011 and will allow the company to save more than 65 million kWh of electricity and 102 thousand Gcal of heat per year. Uralkali will invest about 600 million roubles in the program implementation. The approximate payback period is 5.5 years. The energy-saving program is based on the results of the energy audit conducted at the company from July 2007 to August 2008 by Uralkali experts together with Saint Petersburg-based GCE Energy. The experts examined the aboveground mine facilities, prepared and approved the company’s energy certificate, and advised on measures to substantially reduce the consumption of all types of energy. The program consists of several dozen energy saving measures. The program implementation will involve the modernization of hundreds of the company’s energy facilities.
“Energy expenses account for up to twenty percent of MOP production costs,” said Sergey Diakov, Uralkali deputy general director. “The company’s intention is to reduce these expenses and production costs. The implementation of the energy saving program will be one of the cornerstones in achieving Uralkali’s strategic goals.”
SULFUR
Tampa: The drama ended and the curtain lifted last week, after both Mosaic and PotashCorp came to final agreements with their sulfur suppliers on prices for their fourth quarter contracts.
The new price of $0.00/lt may be the lowest ever at Tampa, and down $150/lt from the previous quarter. Looking at the Green Markets Historical Database going back to 1982, the lowest price for Tampa was $26/lt back in 2001 and the highest was $618.50/lt last year. While zero and sub-zero numbers have been posted at other price points, some players told GM that they had to get their databases ready for the new numbers.
The $0.00/lt price may also be irrelevant. PotashCorp has basically shut down its phosphate production plants and Mosaic was running at around one-third of capacity, which means little or virtually no sulfur will be actually be delivered during the quarter. That doesn’t help the sulfur suppliers much. Refineries were still running full out, or nearly so, and sulfur disposal continued to be a major pain. In some areas, sulfur was being put into landfills or dumped nearby. Galveston was blocking, and vessels were still being used as storage.
Late last week Martin was completing test runs on its new 2,000/mt day prilling unit at Beaumont, which will bring its capacity to about 4,500/mt day, including its other prill unit and its pilot plant. The facility has about 90,000 mt in storage and should reach 150,000 mt by March. Export prices, although very low, were still higher than domestic, and it should help ease the storage problem – assuming it can be sold. In January, three sulfur vessels were loaded at Beaumont, one of which was destined for China, which has returned to the market.
West Coast: New contracts for California officially begin Feb. 1, and it was likely talks will be held at TFI’s conference at San Diego this week. Prices, which were already lower than for Tampa, will probably drop even more, say sources.
Vancouver: Canadian oil producers were facing excesses, but were still able to sell sulfur for around $40/mt as of last week. In areas where blocking is not possible, dumping was underway.
MARKET NOTES
India: The government is looking at deregulating the domestic urea industry so that subsidies can go directly to farmers instead of the current practice of routing them through manufacturers. The move is expected to reduce subsidies, which are projected to go as high as Rs 1 trillion in the current fiscal year from the year-ago Rs 403.38 billion.
The country has been busy developing possible fertilizer projects. IFFCO is looking at a joint venture ammonia-urea complex in Qatar that would produce 2,200 mt/d of ammonia and 3,500 mt/d of urea, with an investment of US$1.2 billion. IFFCO would be able to buy all of the urea at a mutually agreed price and the ammonia at a 20-year average cost of production.
Officials from Syria reportedly visited in January about possible phosphate joint ventures.
In the meantime, the Commerce Ministry has reportedly asked the Ministry of Fertilizers and Chemicals to consider the possibility of an Indian public sector company setting up joint venture fertilizer plants in Cuba. An Indian delegation was reported to have recently visited Cuba and was told that an old plant set up by an Indian company was no longer operational; it was suggested that Indian companies could help build new ones. The product would be used in Cuba and for export to other Caribbean countries.
Pakistan: Engro Chemical Pakistan Ltd.’s US$1 billion urea plant with 1.3 million mt/y capacity will reportedly be ready by mid-2010.
The Minister of Industries and Production reportedly entertained a delegation in Islamabad in January from Thyssen Krupp Technology. Developing new urea plants in the country using Krupp technology was one possibility discussed.
Bangladesh: The government is eyeing the construction of two new urea plants and the overhaul of old plants in order to reduce the country’s dependence on imports. One new plant would produce 577,000 mt/y and would be set up at Saidabad in Sirajgani with Chinese EXIM Bank financing at TK50 billion (US$714 million). A second plant with approximately the same capacity would be built at Fenchuganj, expanding an existing Natural Gas Fertilizer Factory, at a cost of TK60 billion. Six existing urea plants would be upgraded over the next four years for a cost of TK28 billion. Their production would go from 1.4 million mt/y to 1.9 million mt/y.
Poland: The country has decided to speed up the construction of a gas terminal at Swinoujscie, just a few miles from the German frontier. The decision was caused by the gas war between Ukraine and Russia, resulting in cuts of gas to Poland; the largest Polish fertilizers plant Pulawy, in central Poland, was forced to cut its production by 12 percent. Earlier plans were for the terminal on the Baltic Sea to be open in 2014, but now the government is eyeing 2013. The terminal will handle imported gas from Qatar and Algeria. However, source say a lack of tankers could be a problem. In addition, some are arguing for a gas port near Gdansk instead. A final decision is expected this month.
In the meantime, Poland’s largest fertilizer factory, Pulawy, is eyeing coal gasification, according to a company official.
