Urea

U.S. Gulf:

The NOLA granular urea barge range tightened to $430-$438/st FOB from the week-ago $429-$439/st FOB.

Eastern Cornbelt:

Urea pricing was quoted at $475-$485/st FOB in the Eastern Cornbelt, down $5/st at the upper end of the range. Both the high and low were reported in the Cincinnati, Ohio, market during the week.

Western Cornbelt:

The urea market was steady at $460-$480/st FOB in the Western Cornbelt, with the low confirmed at Port Neal, Iowa, and the high at Caruthersville, Mo. The St. Louis, Mo., market was pegged in the $470-$475/st FOB range, with the last offers FOB Camanche, Iowa, reported at $475/st.

Southern Plains:

The urea market remained at $490/st FOB Houston, Texas, and $495-$500/st FOB Catoosa/Inola, Okla. Nutrien confirmed that its Borger, Texas, plant is currently in start-up mode after a major turnaround that began on May 3 (GM May 7, p. 41). The plant is expected to return to normal operation by next week.

South Central:

Urea pricing was pegged at $470-$485/st FOB in the South Central region, down $5-$10/st from last report, with the low reported at Memphis, Tenn., and the high confirmed at Arkansas terminals and out of spot Ohio River shipping points in Kentucky. The last reported price FOB Convent, La., was $475/st.

Southeast:

Urea prices in the Southeast were quoted in the $470-$485/st FOB range out of port terminals, down slightly from last report, depending on location.

India:

RCF called the fifth urea tender of the year to close on July 22 with a shipping deadline of Aug. 31. The call came three weeks after the previous tender closed, confirming the view of many in the industry that the market needs to get ready for a series of new Indian tenders every three weeks.

So far this year, India has imported or booked a total of 2.7 million mt. Last year by the end of July, MMTC and RCF had arranged for 2.8 million mt to be imported.

Unfortunately for India this year, sources pointed out that last year’s first semester included at least 2 million mt of urea from a long-term contract with OMIFCO, a contract that has now expired. Sources said the inability of MMTC or RCF to secure 1 million mt or more in each tender so far this year has left the country shy of about 2 million mt.

Also playing against the Indian buyers this year are the higher prices for urea and freight. The average price of West Coast deliveries through July 2020 was $243/mt CFR, with the East Coast at $245/mt CFR. This year for the first four tenders, which only includes tons booked by the end of June, the average price is $415/mt CFR for the West Coast and $414/mt CFR for the East Coast.

With the exception of the May MMTC tender, prices from each tender jumped an average of 12.5 percent. If that pattern continues, the latest RCF tender could see prices of $573/mt CFR for the East Coast and $564/mt CFR for the West Coast. If the jump is closer to the almost 20 percent increase observed in the last tender, then prices would surpass $600/mt CFR.

Closing Date	Buying Agency	WC Price US$/mt CFR	Tender % Difference WC	EC Price US$/mt CFR	Tender % Difference EC
22-Mar-21	RCF	380.18	25.1	379.87	24.6
4-May-21	MMTC	358.99	(5.9)	356.99	(6.4)
25-May-21	RCF	418.00	14.1	408.88	12.7
24-Jun-21	RCF	501.96	16.7	509.95	19.8

Sources said they see little on the horizon to lower prices. Chinese producers remain hesitant to offer product because of central government pressure to give the Chinese domestic market priority. At the same time, Arab producers are focused on their long-term clients and additional business opportunities in Brazil.

Traders were hesitant to make predictions of where the price will end up once the tender documents are opened. What many agree on, however, is that the price will go up once more.

Middle East:

Urea supplies remain tight even as demand steps up. The most recent deal was earlier this month to an unnamed African buyer, with a netback of $505/mt FOB, which set a new floor for talks. Sources noted that at this level, the price into India for the tender would be $530-$535/mt CFR. For some, that price was seen as the extreme low end of projected prices in the tender to close on July 22.

Issues with production will continue to keep Arab Gulf urea availability limited for the Indian tender. Producers are looking to ensure that their regular, long-term clients are covered before offering tons to India.

The wariness of producers to step in was shown in the last tender, when no producer offered product. Usually, one or two producers will submit offers of small cargoes just to show interest in the event. Sometimes the offers are priced so high that the Indian buyers reject the offers immediately.

The paper market for the Arab Gulf in July is pegged at $490.50/mt FOB for July and $490/mt FOB for August.

Egyptian producers are now asking a minimum of $480/mt FOB for the next round of granular purchases. Sources said some of these deals could be for late-August shipments, but most likely for mid-September.

The current range was set by deals last month for July and August shipment topping off at $475/mt FOB for granular. A prilled urea deal was recently concluded at $465/mt FOB.

The demand for Egyptian urea remains strong in Europe and Africa. Some Egyptian product might also be considered for an Indian tender, depending on the final tender price. The Egyptian paper market is reported at $477.50/mt FOB for July and August.

Abu Qir reported that it will be revamping one of its granular urea units. Under an agreement signed with Thyssenkrupp Fertilizer Technology, the work will raise the daily rated capacity from the current 2,000 mt to 2,500 mt. Work is expected to be completed in 2025.

China:

The threat of an export duty continues to hover over producers thinking about selling their product offshore. The possibility is being seriously considered, sources said. The government is pressuring the urea producers to make sure there is enough urea at lower prices for the domestic market before they move to take advantage of the hot global market.

The possibility of an export duty could lead producers and traders to be hesitant about offering too many Chinese tons in the July 22 RCF tender.

Production of urea is expected to step up as more coal and natural gas are made available in the country for power generation. Earlier drains on the power grid prompted the government to require factories of all types to cut back on their use of electricity in order to avoid blackouts due to extensive use of air conditioners during a recent heatwave.

Even with increased production, sources said urea prices are not expected to come off. Strong global demand is expected to take the producers into September, when the domestic market once again kicks in. Even then, sources said, because of the pressure of the government in favor of domestic sales over international ones, some domestic distributors may use the off season to build up reserves to sell once the local demand kicks in.

Reportedly, producers are telling potential buyers that the floor is $475/mt FOB. However, a report circulated that a granular cargo from China was sold to a Chilean buyer just under $475/mt FOB. This would fit in with what many sources have been calling the market, despite limited offshore deals.

Sources said there is really not much difference in pricing between prills and granular into the global market. Traders pointed to a prilled urea deal last week that went for $470-$475/mt FOB.

As traders review their options for offers into the RCF tender, availability from China remains a major topic of discussion. Sources said so far there does not seem to be a lot of material ready for shipment to India under a new tender. About 200,000 mt is estimated in the bonded warehouses in China ready for export.

However, some of that tonnage is already earmarked to cover awards from the most recent RCF tender. Some sources argued that the return to production of urea, combined with the material available at the ports for export, could allow for about 300,000 mt to be offered from China into India.

Indonesia:

Production has resumed at the PIM granular production facility. The plant was shut down in May because of a shortage of natural gas.

No new deals or tenders were reported this week, holding the granular price at $479/mt FOB, even as the producers argue that $490/mt FOB should be the price.

Brazil:

Reaction to the RCF/India tender call has not had time to sink in and affect the Brazilian market significantly. The price at Paranagua is now pegged at $500-$525/mt CFR, representing a modest increase.

What is hitting buyers are the limited tons available at Paranagua and other ports, which, in turn, leads to shortages inland. Even with reduced availability, sources said there is high demand for trucks to load whatever fertilizer is available at Paranagua for shipment inland. This demand is running up the price of freight to the regional distributors.

The Rondonopolis market appears to have stabilized as buyers look for small quantities on an “as needed” basis. Sources said the price is right at $615/mt FOB ex-warehouse, which represents a movement down on the top end of the previous range and a slight increase on the lower end.

Russia:

Urea exports for the first five months of the year were down slightly, to 2.8 million mt from 2.9 million mt during the same period last year, Trade Data Monitor reported. The top buyer of Russian urea for the period was Brazil at 554,000 mt, followed by Finland at 459,000 mt, Switzerland at 345,000 mt, India at 167,000 mt, and Mexico at 133,000 mt.

May 2021 exports of urea were down almost 30 percent, to 459,000 mt from 645,000 mt in May 2020. The single biggest buyer in May was Brazil at 125,000 mt.