U.S. Gulf:
Further strengthening was observed in the granular urea barge market, with players reporting December-loading trades in the $770-$780/st FOB range, an increase from the previous week’s $763-$780/st FOB. Barges tabbed for January loading were reported at $775-$782/st FOB, while February tons traded up to $791-$792/st FOB, sources said. A rumored $785/st FOB December barge went unconfirmed on Dec. 16.
Nothing new was reported in the NOLA prill market, leaving last-done in the $765-$775/st FOB range.
U.S. Imports:
July-October urea imports were up 84.1 percent, to 1.64 million st from the year-ago 892,618 st. October imports moved up 95.5 percent, to 659,274 st from last year’s 337,302 st, pulling in large cargoes from Algeria, Russia, Qatar, Trinidad and Tobago, Canada, and Oman during the month.
Qatar led imports with 377,212 st during the July-October period, up 14.4 percent from the year-ago 329,767 st, while a huge October total of 189,257 st lifted Algeria to 267,682 st for the fertilizer year-to-date, contrasted with zero tons shipped to the U.S. during the same period last year. Russia was the market’s third-largest import origin at 264,602 st, up 107.2 percent from 127,684 st during the same period last year.
U.S. Exports:
Urea exports were down 84.5 percent in July-October, to 60,739 st from the year-ago 392,194 st. Exports totaled 12,820 st for October, a 77.2 percent tumble from 56,257 st in October 2020.
Eastern Cornbelt:
The urea market remained in a broad range at $815-$840/st FOB in the Eastern Cornbelt, with the low confirmed at Cincinnati, Ohio, and the high out of spot Illinois River terminals.
Western Cornbelt:
Urea prices remained in a broad range at $810-$850/st FOB in the region, depending on location, with the low reported at St. Louis, Mo., and the high out of spot Iowa terminals. Sources confirmed the latest urea offers FOB St. Paul, Minn., at the $860/st FOB level in mid-December.
California:
While urea pricing at Stockton, Calif., remained at the $880/st FOB level at mid-month, sources quoted the West Sacramento, Calif., market at $900-$910/st FOB for bulk tons and up to $970/st FOB for bags. No current delivered urea pricing was confirmed in the state.
Pacific Northwest:
The urea market was quoted at $915-$920/st FOB in the Pacific Northwest, down from the last reported range of $930-$950/st FOB, with the low reported at Rivergate, Ore. The latest rail-DEL urea offers were pegged at $895-$935/st in Washington and Oregon for prompt tons.
Western Canada:
The urea market was quoted at $1,250-$1,265/mt FOB and C$1,255-$1,280/mt DEL for spring tons in Western Canada, with reports that some prepay programs had already been pulled by mid-December.
India:
Just as the week closed, IPL called a urea tender to close on Dec. 23. The shipping deadline is Jan. 31, 2022.
While the market had expected an Indian tender to be called any time in the past three weeks, sources were surprised to see the call come from IPL. The industry was ready to see a tender call come from NFL. Reports from India indicated NFL officials were meeting with the India Department of Fertilizer and Treasury (DoF) for the past few weeks to ensure all the paperwork was prepared properly and in a timely manner for another tender.
In the end, said a number of traders, it must have appeared to the DoF that NFL was not ready, so they went with IPL, which has a solid track record of running urea tenders.Sources said the buyer will shoot for securing 1.5 million mt, which would put the 2021 buying just shy of the 2020 buying program.
The difference for this year, however, is that the tenders needed to bring in at least 1 million mt more because of the end of the OMIFCO contract in July 2020.When the Indians and the OMIFCO negotiators could not come to an agreement, India no longer received the full 2 million mt production from the Omani plant at a steep discount. The lost tons had to be made up in the public tenders just as the price was moving up and supplies were tightening.
Indian buyers have paid an average of $547-$599/mt CFR for 6.7 million mt so far this year, compared with an average price of $262-$263/mt CFR for 9 million mt in calendar year 2020.
China remains out of the global urea market, leaving Indonesia, Egypt, and the Arab Gulf as the primary sources for this tender. Some Russian material may also be offered if it fits within the export plans of that country.
Even with China out as a major supplier, sources said one to two cargoes might come out of the bonded warehouses in China. Most of this material, said traders, was placed in the warehouses before the Oct. 15 export ban. Sources speculated the urea may be released by the Chinese government because it was officially outside the domestic market by the deadline. The only issue was that all the paperwork for an end user was not completed.
The Chinese government made some exemptions for urea exports for South Korea. Sources said the government will most likely also allow the bonded warehouse product to be released.
Nailing down tons from Egypt and the Arab Gulf will also be difficult. Sources said the Egyptian government continues to have concerns about its own domestic market needs being met before any tons are exported. Some producers are not sure if they will be allowed to export in January while they wait for the latest pronouncement from Cairo.
Arab Gulf producers are slowly coming back online, but producers continue to claim they are sold out through most of January with existing contracts.
The Indonesian government may soon be issuing export permits for the urea producers. This could lead to a selling tender in time for tons to be offered into the IPL tender.While there has been pushback against ever-higher price, sources said they would be surprised if the price moved much from the last tender when level touched on $1,000/mt CFR.
To make the first semester of 2022 easier for urea distribution in India, there are solid reports that the DoF and OMIFCO are about to ink a three-year deal for 1 million mt each year. Sources said the annual shipments will be divided between OMIFCO and Fertiglobe.The deal is less than half of what the DoF received under its old contract with OMFICO. Sources suggested the discount rate being offered by OMIFCO will also be less than the old deal.
Sources said the importation and distribution of tons will most likely be handled by RCF. The deal will provide some stability in urea imports, something that has been lacking in 2021.
China:
Rumors are circulating that a couple of large cargoes of urea might be released from bonded warehouses for consideration in the IPL/India tender.
Sources said the urea was already in the warehouses, but did not have a confirmed end user. The lack of a confirmed buyer kept the tons from being released after the Oct. 15 implementation of a urea export ban by the Chinese government. Reportedly traders have been working with government officials to get the tons released, arguing the product was already outside consideration for the Chinese domestic market.
Reportedly, the urea entered the warehouses when prices were in the $400s/mt FOB. Now prices are closer to $930/mt FOB. Even with storage costs, sources said the holders of the product should expect a respectable profit. However, one trader noted there are still issues securing the timely arrival of a vessel into Chinese ports, largely due to COVID-related issues at the ports.
Sources said the government has told the state-owned urea plants they need to step up urea production. Traders said the current production rate is 50-60 percent of the plants’ rated amounts. The government wants production ramped up to at least 70 percent in the first quarter.
The move by the government led some international traders to speculate that if production is increased, there will be enough urea on hand for the domestic market earlier than the May 30 deadline set by the government. The hope, said one trader, is that Beijing will allow more large-scale exports sooner. Such a move, said a source, would help ease the pricing pressure on the global urea market.
Middle East:
Arab Gulf producers continue to say they are sold out through January 2022. Given the likelihood that prices into the IPL/Indian tender will be higher than the netbacks from existing contracts, however, sources said the producers will most likely find several cargoes for traders to offer into the tender.
With China out of the global market, sources said India will have to rely on the Arab Gulf, Egypt, and Indonesia for the bulk of their product. Some tons may also come from Russia, but the bulk of the 1.5 million mt that IPL reportedly wants will come from Arab producers.
Material flowing out of the Arab Gulf this week was either from long-term deals or awards from the most recent India tender. Sources said there is a dearth of spot material, leaving nothing around to test prices.
Sources said OMIFCO and the Indian government are close to signing a deal that will lock up 1 million mt/year for three years. Reportedly, India will be getting less than half of the OMIFCO annual output. The rest of the product will be offered on the open market, most likely by the Omani trading company OQ.
Sources said OQ is using its access to the OMIFCO urea to build up its global customer list past the receiving foreign port. Reportedly, in another year or so it plans to add ammonia to its portfolio. Sources said it plans to reach into local distribution networks rather than depend on various trading houses to get the nitrogen to the ports and beyond.
The paper market for the Arab Gulf was reported at $840/mt FOB for January 2022 and $830/mt FOB for February 2022.
No new deals were closed in Egypt this week, as producers continue to argue for $950/mt FOB. Sources reported a shortage of Egyptian spot material this month because the government increased the amount of urea each producer must hold back for the domestic market. The announcement in late November ordered plants to hold back 65 percent of their output instead of the earlier announced 55 percent.
The Egyptian paper market is reported at $835/mt FOB for January 2022 and $810/mt FOB for February 2022.
Indonesia:
Kaltim V will stay down a bit longer. The plant’s management announced that it now plans to re-open the facility in mid-January instead of the end of December. Gresik is slowly coming back online since its mid-September maintenance shutdown.
Traders said final steps are being taken by the government to issue the 2022 export permits. Reportedly, there is still some hesitancy to release the permits too soon. Sources said the government continues to be concerned that the domestic market should receive priority from the producers over the more lucrative international market.
If the permits are released in time, sources said a tender might be called to allow some Indonesian tons to be considered in the IPL tender.
The Australian government has been in talks with the Indonesian government to secure urea for its diesel emission control systems. The quantity is not overly large when compared with the agricultural demand for urea, but enough to play a role in how many tons will be allowed for export.
Australia:
Australia is facing a urea shortage for the production of AdBlue, a liquid urea that is needed to reduce diesel emissions.
Unlike South Korea, which also faced the shutdown of its transportation network due to a lack of liquid urea, Australia has to rely more on Indonesia and the Arab Gulf for its urea because of trade and diplomatic disputes with China. South Korea was able to get about 18,000 mt directly from China after government-to-government talks were held.
Brazil:
Urea prices in the country are softening as end users refuse to buy forward as long as prices remain high. Sources in Brazil said the price at the ports has come off about $15/mt, to $815-$870/mt CFR. Traders outside Brazil called the market $815-$830/mt CFR.
The fight against higher prices continues inland as well. Sources reported softer prices in Rondonopolis at $920-$980/mt FOB ex-warehouse. Reportedly, supplies in Brazil are strong enough that buyers who are looking for a few top-off tons can get what they need. As long as the demand remains limited, sources said the buyers will keep pushing against higher prices.
The only thing that makes buyers nervous at this time, said sources, is trying to figure out what will happen to global supplies once the Indian tender is awarded. Some also are showing concern over the Russian restriction on ammonium nitrate.
Brazil’s purchases of ammonium nitrate exceed the authorized export amount for the whole world. Local forces are concerned that some usual ammonium nitrate buyers will begin pushing for more urea and cause a temporary shortage of product.