With the flat buying and selling sentiment, sources say prices remain unchanged.
UREA
U.S. Gulf: The week began with claims of product still priced as high as $240/st FOB. By Thursday, however, one or two large buyers reportedly snapped up barges as low as $222-$224/st FOB. As a result, sources said several buyers came into the market after sensing that prices had bottomed. These were reportedly both rice buyers and those upriver looking for fill. This demand prodded prices to move up once again, with sources saying they easily hit $227-$228/st FOB. There were reports of prices topping $230/st FOB by press time, with sellers again rejecting quotes in the low $230s/st FOB.
While some said prices could not go any lower than $220/st FOB, others said they might. Some speculated that there is enough inventory at the Gulf to warrant an export. As noted by CF and others last week (see page 1), increased ammonia use this spring season has crimped urea demand in the Midwest. That said, there did appear to be a lot of interest last week once prices started going down – at least from rice country.
Eastern Cornbelt: Granular urea pricing continued to cover a broad range in the region, with sources quoting terminals in the $280-$310/st FOB range, depending on location. There was little new activity to test the market, however. One source said the last quote he got was still at the $330/st FOB level for spot tons, but that was several weeks ago.
Western Cornbelt: Sources said spot urea prices continued to sink. Iowa and Nebraska sources quoted a broad range for urea at $280-$310/st FOB terminals to the dealer, while southern Missouri contacts put the low end of the regional range at $275/st FOB river terminals.
Southern Plains: Sources said urea continued to move for top dress and side dress activities in the Southern Plains, and spot pricing continued to fall. The urea market was quoted at $270-$275/st FOB regional terminals, with the low end reported out of the Tulsa market from just about every supplier. Some sources talked of lower numbers as the week advanced, but nothing was confirmed.
South Central: Granular urea pricing out of regional warehouses had reportedly slipped to $265-$275/st FOB, depending on location, with the low confirmed at Memphis, Tenn. Those numbers reflected a sizable drop from last report.
One source said the first application of urea on rice was approximately 60-65 percent complete throughout his trade area last week. A contact in the Arkansas and southern Missouri market said urea movement had slowed somewhat, but remained very active in early June. Another said the second rice application may extend until mid-July, with some even expecting a third topdress application on rice this year.
Southeast: Granular urea pricing had reportedly dropped to $305/st FOB port terminals in the region.
Pakistan: One Asian trader noted that for once TCP paid less than a major Indian buyer for urea. Actually, TCP has paid less a few times in the past, but not many. The extra steaming time to a port in Pakistan usually knocks off any discounts the buyer might get in the price of the actual product.
Besides surprising the marketplace with a lower price than MMTC from its earlier tender, TCP surprised folks by taking the firm and optional tons offered by Gavilon. In one bold move to lock in lower prices, TCP covered the full quantity of its first tender.
In the past TCP has passed on the optional tons even if it meant meeting their buying needs. The government buying house would immediately call another tender to cover the remaining tons. This time, TCP is buying all 200,000 mt.
Results of the tender follow.
Suppliers Quantity (mt) Origin US$/mt CFR
Gavilon 80,000 Open 257.89
120,000 (S/O) 257.89
Transfert 50,000 Iran,
Middle East
259.00
50,000 (S/O) 259.00
Transammonia 50,000 Open 259.55
Multicommerce 50-70,000 Open 263.33
Swiss, Singapore 50,000 Middle East,
China, CIS,
Egypt
264.90
25,000 (S/O)
SABIC 200,000 Arab Gulf 264.95
Liven Agrichem 50,000 China,
Middle East
275.00
Toepfer 50,000 Open 277.50
Helm 75,000 Open 285.00
75,000 (S/O)
Sources say the Gavilon tons will be coming from Sabic (120,000 mt) and PIC (80,000 mt). One trader noted that the Arab Gulf material was offered in an effort to sell tons into Pakistan. The traditional producers in the area were shut out of the recent MMTC/Indian tender that accepted only 150,000 mt from Transammonia.
Some sources peg the freight from the Arab Gulf at $16-$17/mt. Others say it could be as high as $25/mt. No matter what freight rate one uses, the bottom line is that Sabic and PIC will have a lower netback than what they offered India late last month.
The next step in the area urea story comes June 12, when TCP closes its second tender for 200,000 mt. Sources in the industry expect to see another $2-$5 shaved off the current price. After that, they say, the market will have pretty much bottomed out.
At the same time, sources say the June 12 tender could be concluded as quickly as the June 5 tender. That will then leave a major buyer out of the market for the rest of the year.
Some in the industry say once this last tender is closed, Pakistan will no longer be in the import market, because new production will be fully online by the end of the year. The government had hoped to be self-sufficient by the end of the second quarter this year, but problems with natural gas supplies forced the government to cut back on urea production.
The temporary diversion of natural gas from industrial to residential use caused domestic urea plants to lose about 400,000 mt in production. The government plans to reinstate full gas supplies next month.
India: With the MMTC tender closed and sellers disappointed that the buying house took only 150,000 mt, and with the last of the 2010 TCP/Pakistan tenders about to close, sources say another tender from India is expected soon.
Speculation that another tender would be called by June 11 were dismissed by most in the industry. Sources said the Indians can see as clearly as everyone else that the market is in a slide. The buyers would like to nail down a lower price than what MMTC and TCP pulled in their respective tenders. With TCP closing a tender June 12 and with many saying the price will be down a couple of bucks from the June 5 tender, Indian buyers are expected to call a tender sometime after June 14.
Any tender that allows for shipment after July 1 could easily include Chinese tons as well as traditional Black Sea and Middle East tons.
Middle East: The surprise acceptance by TCP of the Gavilon offer – backed by Sabic and PIC – of 80,000 mt firm and 120,000 mt optional at $257.89/mt CFR dropped the price in the region.
One source noted that depending on the freight rate, the netback price could be lower than what the producers countered to MMTC, but higher than what MMTC was willing to pay.
The generally accepted freight rate is $16-$17/mt. That would put the netback at $240-$241/mt FOB. The producers’ counter-offer to MMTC was at $245/mt FOB from an initial offer of $249/mt FOB. The MMTC bid was at $238/mt FOB.
If freight is higher, however – and more than one trader makes a case the freight could be $20-$25/mt FOB – the netback drops to $232-$237/mt FOB.
Few think the freight could be as high as $25/mt, but most can agree that $20/mt is likely.
Sources speculate that the Saudi tons are ones that Gavilon earlier picked up for delivery to the U.S. Reports of a slower urea market in the States prompted Gavilon and Sabic to look elsewhere for a better deal.
One source noted that the netback on a sale to NOLA could have been as low as $210/mt FOB because of the formula worked out under the long-term contract. A deal with a netback of $230s/mt FOB is better than one in the $210s/mt FOB, he said. He argued that no one should object to the diversion.
The issue now is what will happen in the June 12 TCP tender and the subsequent and expected Indian tender.
There are still a large number of unsold cargoes in the Arab Gulf, say sources. At the same time, Iranian sellers are making noises of offering low-ball prices to secure a deal.
Even producers now say the market may have a couple of more dollars to fall before it reaches its nadir. Based on the estimates of freight from the AG to Pakistan, sources now peg the Middle East market at $232-$242/mt FOB for both prills and granular.
Black Sea: Lonely and left out of all the exciting discussions about India and Pakistan, more Black Sea urea producers are looking to cut back on production.
Prices in the area hovered in the low $220s/mt FOB as the month started and the industry gathered in Paris for the annual IFA conference. Nothing said at that conference provided any joy to the area urea producers. The continued slide in prices into India and Pakistan provided further glum news.
One Asian source estimated a freight rate of $50-$55/mt from Yuzhnyy to Pakistan. Based on the latest TCP tender results, the Yuzhnyy-equivalent price would be $200-$205/mt FOB.
No one is saying any deals were done at that low level, but lacking any other deals to major buyers, many in the industry are beginning to use that level as a touchstone.
The only buyers that seem willing to take material out of the Black and Baltic Seas are from Latin America. And they seem more interested in buying only on an as-needed basis. With sliding prices, few buyers – end users or traders – seem interested in taking long positions.
Despite a calculated market price just barely above $200/mt FOB, observers say the best guess for the market is $210-$220/mt FOB.
Indonesia: Kaltim is said to be ready to call a selling tender any day. The state-owned producer is asking for permission to sell 30,000 mt by the end of the month.
One Asian trader said the company has a track record of offering tons for sale just as the market price hits rock bottom. With that in mind, he said the tender will most likely be held by June 19 – after the TCP/Pakistan tender confirms a continued slide in prices, but before India comes in.
All in all, Kaltim is hoping to sell 400,000 mt this year in exports.
China: Sources say the sales price is rapidly closing in on production costs. The domestic price is pegged in the low $230s/mt FOB ex-factory. Adding the costs to transport and store material at dock-side warehouses for export, the price rises to the $250s/mt FOB ex-port.
Unless someone can nail down $5-$7/mt freight, few of these tons will be competitive without a loss into India or Pakistan.
Sources say some traders holding tons still sitting in bonded warehouses may be willing to take a loss on their holdings to clear the books.
Without major export sales as a possibility, sources say producers are turning to the domestic market for salvation. Domestic demand is steady but not brisk, say sources.
Export figures for the July-September period this year are expected to be lower than last year. The softer international market makes it difficult for Chinese producers to sell their tons, even with an export duty of only 7 percent.
Bangladesh: Bangladesh Chemical Industries Corporation (BCIC) said it suffered a huge loss for closing operations of the Chittagong Urea Fertiliser Company, Urea Fertiliser Limited, Palash Urea Fertiliser Limited at Ghorashal, and Jamuna Fertiliser Factory for the last two months. The loss will cross the US$90 million mark if gas is not supplied immediately to the fertilizer plants.
The government suspended gas supply to five fertilizer factories from March 29 to April 1, closing down their operations to divert gas to power plants to increase electricity generation for irrigation. It was supposed to resume by mid-May, when the irrigation season would be over. But the gas supply to the Karnaphuli Fertiliser Co. was resumed in the first week of May after the company informed the government that it would have to pay compensation for the suspension, while others are awaiting government orders.
The Bangladesh urea industry received another setback with the June 8 closure of the Ashuganj Fertilizer factory (1,600 mt/d of urea). According to the local media the outage was due to mechanical problems, which included a leak in the ammonia plant compressor. The company has said it could take five days to complete repairs.
NITROGEN SOLUTIONS
U.S.Gulf: Price ideas continued to erode last week. Sources said that $170/st was floated as a fill price, and wound up being the new expectation for prompt. Buyers have their eyes on much lower numbers for fill product, remembering the $120/st from last year. Few believe prices will get that low this year, but they have hope.
Eastern Cornbelt: Sources pegged the UAN-32 market at $230-$245/st ($7.19-$7.66/unit) FOB in the region for prompt tons, with forward contract offers reported in the $7.45-$7.75/unit FOB range for July, depending on location. One source pegged the UAN-28 market at the $210/st ($7.50/unit) FOB level in his trade area last week.
Western Cornbelt: UAN-32 pricing had slipped considerably in the region, with sources pegging the terminal market in the $215-$240/st ($6.72-$7.50/unit) FOB range last week, depending on location. The low end was quoted out of spot river locations, with the upper end at inland terminals.
Southern Plains: The UAN-32 market had reportedly slipped to $225-$245/st ($7.03-$7.66/unit) FOB regional terminals, with the low out of production points and the upper end at truck terminals.
South Central: UAN-32 was down from last report, with spot pricing tagged at $215-$230/st ($6.72-$7.19/unit) FOB regional terminals to the dealer. The upper end was confirmed for spot sales early in the week.
Southeast: Georgia sources said UAN continued to move briskly on cotton. UAN-32 was quoted in the $210-$215/st range ($6.56-$6.72/unit) FOB Savannah, Ga., while pricing at some inland terminals in the state was reported as low as $205/st ($6.41/unit) FOB on a spot basis. The UAN-30 market had reportedly dropped to $198/st ($6.60/unit) FOB port terminals in early June.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate was steady at $305-$325/st FOB, with limited tons available. The upper end of the range was quoted in the Iowa market.
Southern Plains: Ammonium nitrate remained at $295-$305/st FOB in the region, with limited tons available.
South Central: Ammonium nitrate out of regional terminals remained in the $300-$310/st FOB range, with the low quoted in Arkansas and Memphis to the dealer.
Southeast: Ammonium nitrate was quoted in the $310-$325/st FOB range, with the low out of shipping points in northern Alabama and the high FOB Tampa. Sources said there were limited nitrate tons in the Tampa market, with inventories likely to stay tight through June before balancing out in July with incoming cargoes.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was unchanged at $240-$250/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate was steady at $240-$250/st FOB regional terminals, with inventories described as “extremely tight” in rice-producing areas of the region.
Southern Plains: Granular ammonium sulfate was unchanged as well at $215-$255/st FOB Texas shipping points, with the low at Freeport and the upper end at Littlefield or Plainview, depending on supplier.
South Central: Granular ammonium sulfate remained in very tight supply in the region as product continued to move on rice. Sources pegged the market at $230-$240/st FOB, with the low reported in Louisiana and Memphis and the upper end in the Arkansas market.
Southeast: Granular ammonium sulfate remained $210-$220/st FOB, with reference levels at the $235/st DEL mark in Florida.
PHOSPHATES
Central Florida: Phosphate prices in Central Florida were running at a premium to the NOLA DAP/MAP barge market, but were about equal to the export market. Under normal circumstances, the NOLA market should be higher than Central Florida. However, neither market was particularly, or even remotely, robust last week. At the same time, the costs of transportation – rail from Florida compared to barge – were higher proportionately, which only added to the discrepancy.
Regardless, the Central Florida market was in the summer doldrums last week, and that will likely continue until sometime in July or possibly even August. Crop prices will be the key as to how much business there will be in the fall season.
Fill programs were not even a consideration. Virtually all dealers want empty bins at this time of year, at least for phosphate.
The Central Florida DAP price range last week moved from $400-$415/st down to $400-$410/st FOB. CF’s price was $400/st FOB, and Mosaic was offering to sell at $410/st FOB, but would probably sell for less. PCS was making sales at “competitive prices.” Agrifos’ prices were $440/st FOB for MAP and $430/st FOB for DAP, and railcars were about $5/st FOB less.
U.S. Gulf: As expected, activity in the Gulf’s NOLA DAP/MAP barge market was down and prices were drifting south. At the moment, there were few buyers and few sellers. Anybody who needed to move a barge had to cut the price to generate any interest.
Just how low it will go was a guess. Sources said it could drop to somewhere between $370/st and $380/st FOB, which was well below the current range. However, there were not that many barges available, and the situation would begin to change – probably rapidly – once buying for the fall season begins, sometime in July or August. One source described the market as “nervous.” A large trader said his company had been offering to buy at $380/st FOB, but no one had accepted at that point.
Several large sellers were showing no real interest in dropping prices to appease the market by keeping their prices up, rather than be competitive. Some have made export sales that will control their inventories – and at better prices – while others appeared to simply be comfortable with their positions.
How good a season it will be will depend on the price of corn – the backbone of the industry – when the buying begins. The price has been slipping for about a month, and late last week it had recovered to $3.59/bushel for December corn on the futures board. If the price the farmer actually gets drops below $3/bushel, farmers may be more likely to curtail their phosphate purchases.
Wheat was doing relatively well in the field, and if crops continue to get adequate rain, those farmers will most likely begin to buy in fair volumes in about a month or so. If not – then not.
Based mostly on offers to sell last week, the NOLA DAP barge range drifted south from $395-$400/st FOB to $385-$387/st FOB the previous week. It seemed more likely prices will go down than up during the next several weeks.
Eastern Cornbelt: DAP was quoted at $435-$450/st FOB regional warehouses, with the low end reported at Peoria, Ill., and Cincinnati, Ohio. MAP was $10/st higher than DAP. 10-34-0 was quoted at $335-$355/st FOB in the region, down slightly from last report.
Western Cornbelt: DAP was pegged in the $435-$450/st range FOB, with the low reported in southern Missouri. An Iowa source put the common dealer market in the $440-$450/st range FOB warehouses last week. MAP was $10/st higher than DAP. 10-34-0 was quoted at $325-$335/st FOB in the region.
Southern Plains: DAP pricing had reportedly dropped to $430-$435/st FOB the Tulsa market, with most dealer quotes at the upper end of that range. MAP was $10/st higher than DAP.
10-34-0 was quoted at $335-$345/st FOB in the region, with some Kansas sources talking of limited availability in early June. Agrium’s phosphoric acid postings moved on June 1 to $745/st rail-DEL for both super phosphoric acid and merchant grade acid in Colorado, Kansas, Oklahoma, New Mexico, and Texas.
South Central: DAP out of regional warehouses was pegged in the $430-$440/st FOB range in early June, down slightly from last report. MAP was $10/st higher than DAP. TSP remained at $390/st FOB the warehouse for limited tons.
U.S. Export: The only activity found last week was by Agrifos, which was loading two vessels – one in late June and the other in July – with 45,000 mt of MAP for a customer who was not identified, but was believed to be in Brazil. The price was also not revealed, but was believed to be in the $445-$450/mt FOB range. PhosChem and other North American phosphate sellers may have been loading vessels, but had made no new sales.
However, Pakistan purchased a few vessels at about $500/mt DEL. Bangladesh was in the market, and other promising markets were said to be Brazil and India. Prices on the export market have fallen to about the same level as that of Central Florida, but were still well above the prices on the Gulf river system.
A recent decline in ocean freight rates will benefit those in the export market. Transportation to India declined from about $75/mt to around $63/mt, and other areas were similarly affected.
The export DAP price range last week changed from a flat $450/mt to $445-$450/mt FOB. The increased value of the U.S. Dollar was a factor to some degree. The trend has been downward, and that may continue in the short term.
POTASH
Eastern Cornbelt: Potash was unchanged at $395-$405/st FOB regional warehouses, depending on grade and location.
Western Cornbelt: Potash was steady at $395-$405/st FOB regional warehouses, depending on location.
Southern Plains: Sources quoted the potash market at $395/st FOB regional warehouses to the dealer. Granular potash FOB Carlsbad, N.M., remained in the $385-$390/st range.
South Central: Potash pricing out of regional warehouses had reportedly slipped to $380-$385/st FOB, with one source describing warehouse tons “consistently” at the upper end of that range in early June. Sources quoted potash barges in the $355-$360/st range.
Southeast: Potash was pegged at $400-$405/st FOB and $410-$420/st DEL in the Southeast region.
SULFUR
Tampa: In preparation for the hurricane season, which began June 1 and runs through the end of November, Mosaic has been purchasing and has begun receiving sulfur from Russia and the Middle East. That will help supplement inventories of sulfur it receives under its contracts with domestic suppliers. The price, although believed to be higher than its contract price, was not available.
With prices on the world market drifting south, speculation was that third-quarter prices for molten to Tampa will not increase in the next round of negotiations, and may even move downward. The world market was softer, in large part due to China and its lower level of purchasing.
So far, the gigantic oil slick pouring out of BP’s Deepwater Horizon well in the Gulf of Mexico was not creating any transportation problems for vessels transporting sulfur to Tampa. That situation could change, depending on currents.
Refineries were cranking at a very high level last week, but the Department of Energy (DOE) and the American Petroleum Institute (API) offered different findings of the rates. The DOE said the rate was 89.1 percent, while API estimated a rate of 86.1 percent. Regardless, the production rate was increasing supplies of sulfur, and the market was said to be in balance.
Vancouver: China was still in the process of negotiating new prices for sulfur, and was said to be seeking between $120/mt and $130/mt DEL. If ocean freight rates continue to fall, the impasse could be bridged in the near future.
MARKET NOTES
Pakistan: The gas-deficient Pakistan fertilizer industry welcomed news about the Iran-Pakistan gas pipeline sovereign guarantee agreement, which was recently signed in Turkey. The agreement between Pakistan and Iran is for the import of 750 million cubic feet daily of natural gas, with a provision to increase it to 1 billion cubic feet per day. The imported gas volume is nearly 20 percent of Pakistan’s current gas production, and supply is for a contracted period of 25 years, renewable for another 5 years. The whole of the imported gas will be dedicated to the power sector in order to provide relief to the fertilizer industry.
