U.S. Gulf:
NOLA granular prompt prices continued to move lower, with sources putting recent trades at $236-$245/st FOB, down from the week-ago $245-$252/st FOB. By Wednesday, prices had dropped to the low $240s/st FOB, but continued to decline Thursday. While some had speculated that the MMTC tender might bump up prices that was not the case for NOLA, where sources said incoming imports and worries about the fall season were putting a damper on prices.
Prills were called $260-$270/st FOB, down from the earlier $270-$272/st FOB.
U.S. Imports:
July-August urea imports were up 32 percent, to 388,573 st from the year-ago 294,559 st. They slacked off in August, however, falling 11 percent to 187,276 st from the year-ago 209,267 st.
U.S. Exports:
July-August urea exports were off 43 percent to 192,426 st from the year-ago 337,944 st. August exports were down 21 percent to 130,974 st from the year-ago 165,881 st.
Eastern Cornbelt:
Urea pricing remained at $280-$290/st FOB in the Eastern Cornbelt, with the low confirmed at Cincinnati, Ohio.
Western Cornbelt:
Urea pricing was down slightly at $275/st FOB St. Louis, Mo., and $280-$285/st FOB Caruthersville, Mo. The Iowa urea market was quoted at $290/st FOB and $290-$300/st DEL, with the St. Paul, Minn., market remaining at $280-$285/st FOB for fall tons.
Southern Plains:
With barge transit finally restored to the Arkansas River in early October, sources reported urea pricing in the $290-$295/st range FOB Catoosa/Inola, Okla., at midweek, down from a recent high of $315/st FOB.
The Houston urea market was also reported at the $295/st FOB level at mid-month, while pricing at Enid, Okla., fell at the $285/st FOB mark, give or take.
South Central:
Urea pricing remained in a broad range at $270-$290/st FOB terminals in the South Central region, with the low confirmed at Convent, La., and the upper end out of Arkansas River terminals. The Memphis, Tenn., urea market was unchanged at $285/st FOB in mid-October.
Southeast:
Urea pricing was up slightly at $300-$310/st FOB port terminals in the Southeast, reflecting a $10/st increase from last report, with the low quoted at Wilmington, N.C., and the upper end at Charleston, S.C.
India:
MMTC called a tender for prilled or granular urea to close on Oct. 14. Industry sources were not surprised that a tender was called, but what was unusual was the fact that the tender was called more than a week before the last day of shipping for the last tender. Sources now figure that all the vessels for the awarded tonnage in the last tender were nominated so there would not be any conflict between the old and new tenders.
India is said to be desperate for more urea. The rains got better, pushing back the closing of the current season by at least two weeks, said one trader. The positive weather led farmers to pick up their urea buying. Sources estimate that MMTC will try to buy 1 million tons in the latest tender.
Pricing ideas for this tender are expected to either remain at the current $275-$278/mt CFR level or go up a couple of bucks. Sources said freight rates have been increasing in the past few weeks. The increase in bunker fuel and other handling costs is coming as producers in China and the Arab Gulf are digging in their heels against any further price drops.
The bulk of the hoped-for 1 million tons is expected to come from Arab Gulf suppliers. Traders said Chinese sources are telling them 400,000-600,000 mt will be available for export, depending on the strength of the just-starting Chinese season. Several sources said the odds are that less than half-a-million tons will be backed by Chinese producers.
Arab producers are expected to have enough tons to help MMTC reach its million-ton goal. The issue will be the price.
In the last tender, ADNOC came in at $254/mt FOB for 225,000 mt when other producers were publicly saying the price was $260/mt FOB with not a lot of tonnage available from the Gulf. Sources now say the lack of demand from major Arab Gulf buyers in Australia, Thailand, and the U.S. could mean more material is available for India.
Even if MMTC takes 1 million tons in this tender, sources said another tender will be called soon after the ship-by date of Nov. 18. At that time, if the rains continue, another million tons could be purchased to close out the season and lay in reserves for the next season.
The big issue for the Indians will be to keep an eye on the tons coming from China. Previously some award winners have attempted to slip in Iranian urea stored in Chinese bonded warehouses. This so-called “Chi-Ranian” urea is not allowed under the terms of the MMTC tender documents.
In the past, however, some port authorities have issued documents that disguised the origin of the Iranian product. In some cases, the Chinese government discovered the “creative paperwork” and prosecuted the port authorities. In other instances, competitors pointed out the loading of differently marked Iranian product to the Indian inspectors, forcing the loading to stop and the trader to find compliant urea to fulfill its award.
One trader said if the Iranian product can be loaded without detection, the trader could turn a nice profit. However, he said there are always a bunch of other traders keeping an eye on the warehoused Iranian product, and who stand ready to report any effort to slip the tons into the Indian supply chain. Sources repeatedly have criticized the low price offered by Iran as a major disruptive force in the global market.
China:
Sources said prices remain steady at around $260/mt FOB for prilled and granular urea. The stability in the price is said to be more a result of positive expectations of a strong domestic season rather than of the influence of the MMTC tender.
The application season kicked off this week. Demand is slow so far, said sources, but weather patterns suggest things should pick up in the next few weeks. Producers are calculating that demand will be strong enough for them to hold to the $260/mt FOB price for international buyers, without missing a beat. However, traders said producers seem willing to engage in talks at just under the $260/mt FOB mark. One trader said he was close to a deal at around $255/mt FOB, but others questioned whether the deal will be concluded at that level.
How strong the producers perceive the domestic market to be will help determine how many tons they make available to international traders for the Indian MMTC tender. If there are indications of a slow but steady start, sources said producers may make as many as 600,000 mt available for export. If demand spikes through this weekend, however, available tons may be as low as 300,000 mt. Many in the industry think the producers will be good for at least 400,000 mt, regardless of the local demand.
With producers ready to hold to current levels in the low-$260s/mt FOB, sources said the landed price in India will have to come up a few dollars to reflect the slight increase in freight costs. Sources now say the shipping rate has moved closer to $18/mt for an East Coast India delivery, instead of the previous $16/mt.
Reportedly Chinese authorities will continue to keep an eye on the Iranian urea in bonded warehouses to see that no local port officer engages in “creative paperwork” to disguise the origin of the product. The Iranian urea in the warehouses has been shipped in small lots to buyers in Asia who either received waivers to buy the product or who don’t care about facing the wrath of the U.S. Treasury Department.
Brazil:
The price of urea around the country ranges from offers close to $285/mt CFR to bids of $270/mt CFR. Sources said some business had been done at the $275-$280/mt CFR level, with the possibility that a few deals could have been concluded in the low-$270s/mt CFR early in the week. Brazilian traders said it is unlikely that much of the low-$270/mt CFR material is still available, however.
Demand for urea remains spotty even as more tons keep arriving. Sources said demand should be picking up at this time of year. Buyers have already prepared for more tons to come in from the usual places such as North Africa and the Arab Gulf. Even about 170,000 mt of Iranian product is arriving this month.
The delay in moving more tons out of warehouses and out to the fields is coming from farmers, who are reportedly not seeing prices for their products rising high enough to justify large-scale fertilizer purchases. Traders said the inland buying appears to be limited to hand-to-mouth purchases at this point. Sources put the total amount of urea imported from January through September of this year at 3.5 million tons, about 3 percent higher than last year.
The supply pipeline is crowded with urea, from the ports to the local distributors. One trader said there are reportedly vessels coming into various ports around the country with no buyers lined up to take the product. He noted that usually at this time of year the urea is sold to a specific buyer inland even before the ship enters the harbor.
The low crop prices, combined with a weak real against the U.S. dollar, are affecting the farmers’ willingness to step up to make long-term purchases. The excess urea in the market is also being aggravated by reports that some local buyers are looking to other cheaper sources of nitrogen. One trader pointed to purchases of ammonium sulfate and NPK by some distributors instead of urea for their local users.
To add more confusion to the market, sources said the presence of cheaper Iranian urea in the southern part of the country is affecting sales in other markets. Sources estimate that the product is $20-$25/mt cheaper than urea from the Arab Gulf and North Africa. At the same time, the Iranian product is only available to distributors in the southern states of Santa Catarina and Parana.
A cargo of Iranian urea is being unloaded from the Golafruz this weekend. The vessel is discharging its 66,000 mt of urea at Imbituba in the state of Santa Catarina. In return, it will take on a cargo of grain for Iran. A second vessel, the Amina, is scheduled to arrive on Oct. 15 with 65,000 mt of urea, also in a urea-for-grain barter deal.
So far this year about 310,000 mt of urea from Iran has been sent to Brazil under a loophole in the U.S. sanctions that allows for countries to provide agriculture products to Iran in a barter exchange for other products. In this case, Iran has been taking corn, wheat, and soybeans from Brazil in exchange for urea.
Earlier this year, two vessels faced a problem of not being able to buy the fuel necessary to return home because of the U.S. sanctions. The Brazilian courts eventually ordered the state-run petroleum company to provide the fuel so the ships could return home with their bartered goods.
International traders said they have heard reports that buyers in other states in central Brazil are also applying for permission to import the Iranian urea. Sources said the buyers must navigate complicated paperwork to avoid facing sanctions from the U.S. for dealing in sanctioned material.
Presently the Iranian material that has entered Brazil has been handled by one company, which has taken it through a process of “nationalizing” before mixing it with urea from other sources for inland distribution. This nationalization process is not any different from what urea from the Arab Gulf and North Africa faces. Sources said the cost to the importer is about $35/mt.
If more states receive permission to use the Iranian urea, sources said the national government will have to arrange for Iranian vessels to have permission to stop in ports other than Imbituba, to avoid a repeat of the sanctions affecting the unloading, loading, and fueling of the ships. Trucking the product from the far south to even the middle of the country would require more trucks, and more robust accounting tools.
Besides keeping the value of the Iranian tons separate from other sourced urea, each state the product passes through will attach a tax on the product based on its value when it entered the state. This transit tax is imposed even if the urea is destined only for another state.
Bangladesh:
The BCIC tender for 25,000 mt of granular urea and 50,000 mt of prilled urea closed on Oct. 7. Offers showed a lower price, reflecting the general decline in the global urea market.
The tally for the tender follows. The product is to be bagged before shipping. Sources said the source for most of the offers appears to be China.
25,000 mt Granular Urea for Chittagong Port
| Offering Company | US$/mt CFR Bagged |
| Swiss Singapore | 297.30 |
| Agrifert Liven | 304.87 |
| Aries | 306.41 |
| Gentrade | 307.22 |
| Wilson | 309.95 |
50,000 mt Granular Urea for Mongla Port
| Offering Company | US$/mt CFR Bagged |
| Swiss Singapore | 299.10 |
| Agrifert Liven | 305.97 |
| Gentrade | 307.22 |
| Aries | 309.41 |
| Wilson | 309.77 |
Middle East:
Arab Gulf producers are reportedly beginning to ask for prices above $260/mt FOB now that India has called another urea tender. Sources said no deals have been done that break that level, however.
Higher freight rates and an aggressive attitude by the Indian buyer could mean that the netback price to the producers does not move, even as the landed price goes up a dollar or two. Sources are expecting to see the Arab Gulf offers in the Indian tender to be in the low-$260s/mt FOB, but the offers could end up back in the mid-$250s/mt FOB.
Two producers in Egypt took advantage of the positive pricing views this week. MOPCO sold 30,000 mt of granular urea at $255/mt FOB, a $5/mt bump in prices from last week. By the end of this week, Helwan sold 17,000 mt at $257/mt FOB.
Sources said the drop to $250/mt FOB last week was too low and required a quick correction. The news of the Indian urea tender, combined with some interest from European buyers for prompt tons, pushed the price back up.