U.S. Gulf:
New granular urea prices saw a big drop in early-year trading, but then rebounded as the week progressed.
Sources said the year started with business in the $724-$730/st FOB range, down from the last 2021 business at $770-$780/st FOB. Prices eventually dropped to as low as $615/st FOB during the week before rebounding back to $690-$705/st FOB.
One explanation for the drop was that 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. There was speculation that some importers may not have had a home or storage for their product, thus the cut in prices.
On top of that was the roughly 9.5 percent drop in prices in India’s latest tender.
In the meantime, thinly-traded NOLA prills were reported to be offered around the $700/st FOB mark.
Eastern Cornbelt:
Sources reported softer urea prices in the Eastern Cornbelt in early January, fueled by a volatile NOLA barge market. “It will be interesting to see how these fertilizer markets hold up during the slow time of the year from now through January and February,” said one regional contact.
Urea pricing was quoted in a broad range at $770-$815/st FOB in the region, with the low confirmed out of spot Ohio River locations at midweek. The Cincinnati, Ohio, market was pegged at $805-$810/st FOB, although some sources speculated that lower offers were on the table as the week progressed.
Michigan sources pegged the terminal market at $845-$885/st FOB in early January, depending on location and time of shipment, with the low confirmed for prompt tons at Toledo, Ohio, and the high for Q1 offers FOB Webberville, Mich.
Western Cornbelt:
A volatile NOLA urea market contributed to a wide range of terminal pricing in the Western Cornbelt in early January. While Iowa sources continued to quote offers at the $840/st FOB level, pricing from some suppliers at St. Louis, Mo., reportedly dropped to the mid-$700s/st FOB at midweek.
Northern Plains:
Urea pricing slipped to $870-$910/st DEL in North Dakota, depending on location, down from the last reported range of $940-$990/st DEL in mid-December. The last urea prices confirmed at St. Paul, Minn., were in the low- to mid-$800s/st FOB, but sources said the wildly fluctuating NOLA barge market in early January made it difficult to establish an accurate range.
Northeast:
The urea market was quoted at $850-$895/st FOB in the Northeast, with the low at Baltimore, Md., and the high reported at Lancaster, Pa. In the Southeast, new pricing was confirmed at $830/st FOB Savannah, Ga.
Eastern Canada:
Urea pricing in Eastern Canada slipped to C$1,200-$1,235/mt FOB in early January, depending on location, down a full C$100/mt at the top end of the range.
India:
Sources began the new year talking about when the next Indian urea tender will be called. Reports circulated that the call may come as early as Jan. 15. Sources said the country still needs about 1.25 million mt for the season, with demand running strong.
Some traders, however, said the tender would most likely not be called until all the vessels for the urea awarded in the Dec. 23 IPL tender were nominated. With that limitation in mind, one trader said the earliest a tender could be called is Jan. 24.
China:
There has been discussion of a few small cargoes being released for shipment in containers for South Korea and Japan. These orders apparently are for the emission control programs in those countries. Large-scale exports are not expected any time soon.
Sources said producers have stepped up their production rate, as requested by the government in December. The increased production, said one trader, is to ensure a plentiful supply of urea as domestic demand begins in February and March.
One trader said the Feb. 1 Lunar New Year celebrations will lead to most production facilities closing as workers take advantage of the week-long celebrations. The Winter Olympics take place shortly thereafter. Sources said the Beijing leadership will want the plants to remain closed after the new year celebrations to keep the skies clear of pollution during the global event.
Production is not expected to kick back in until late February or early March. By then, said one source, the demand for natural gas to heat homes may abate, allowing more gas for industrial use. This could allow for more production into the second quarter.
The original reason for restricting exports was to build up domestic reserves and shelter Chinese farmers from the ever-rising global price of urea. The reserves and isolation from the world market have had an effect on pricing. Sources said the price for product out of the factories is now close to an export equivalent price of $450/mt FOB.
Even the price of the limited tons under discussion for South Korea and Japan is well below the current estimated global price. Sources said sellers are asking $800/mt FOB for their product, while buyers are bidding $750/mt FOB.Based on the IPL/India tender, sources said the netback to China is closer to $860-$865/mt FOB.
Pakistan:
The Pakistan government announced that it will be buying 50,000 mt from China in a government-to-government deal, with part of the order arriving in early February. Sources said the deal may be for as much as 125,000 mt.
International traders were skeptical the deal would take place when word first came out of Pakistan. The country tried late last year to purchase a total of 100,000 mt in two open tenders. In both cases, no one offered tons due to the tight nature of the market.
China has made some exceptions in its export restrictions for smaller lots. So far, however, the exemptions have been for East Asian countries that need urea for emission control systems. If the deal with Pakistan goes through, it would be the first major exemption for urea for agricultural use.
Indonesia:
The industry was pleased to hear that the 2022 export permits were issued just as the new year began, but sources said no one expects to see a major selling tender until late February or early March. The domestic demand is still strong enough that producers are focusing their attention at home.
November export numbers were released this week. Trade Data Monitor reported January-November 2021 exports at 1.97 million mt, down 9 percent from the 2.17 million mt exported during the same period in 2020. The Philippines, Australia, Vietnam, and India were the top four buyers in 2021, taking a total of 1.09 million mt.
November 2021 exports were reported at 174,000 mt, down 32.7 percent from the 259,000 mt shipped in November 2020. Mexico, China, and Argentina were the top buyers in November.
Middle East:
Arab Gulf producers claim they are sold out through January, with some reporting that they are sold out into early February as well. The resulting price from the IPL/India tender showed a drop in the netback to the Arab Gulf. Fertiglobe settled on $867.70/mt FOB with IPL, and trader offers with Arab Gulf backing showed netbacks at $864-$869/mt FOB.
Egyptian producers said the late-December sale by MOPCO at $960/mt FOB for January shipment is the basis for any discussion of future sales. However, netbacks for at least two Egyptian cargoes slated for India under the IPL tender showed netbacks in the low-$840s/mt FOB.
One producer said because the primary market for Egyptian urea is Europe, the netback from an Indian deal should not be part of the discussion. However, European buyers apparently disagree. Sources said buyers backed off from talks following the awards in the IPL tender. Sources said the Europeans are getting help from the falling prices in Brazil and the U.S.
The lack of any new business apparently prompted some producers to begin discussing lower prices.International traders said offers of $960/mt FOB for January and February shipments were lowered to $930/mt FOB and closed out the week at $860/mt FOB. As the week ended, sources said no new deals were signed.
Brazil:
Pressure from inland buyers to lower prices appears to have worked. Sources said the portside price came down a bit to $815-$840/mt CFR.
The push for lower prices came on the heels of the lower price exhibited in the Indian urea tender. At the same time, buyers in Brazil hoped their refusal to make any new bids could push down the price.
Sources said the Rondonopolis price settled at $920/mt FOB ex-warehouse, the low end of the price range just before the year-end holiday season.
Sources said buyers remain nervous, however. There is still strong demand for product, and congestion at the ports could mean delays getting product to the buyers inside the country. Reserves at local distributors are reportedly very low and in need of steady replenishment, especially with stronger demand expected later in January through March.
To add to the concern of higher prices inland, sources reported that urea and other fertilizers will no longer be exempt from an intra-state tax. Beginning this year, fertilizer will face a 1 percent intrastate transportation tax on the value of the product. That tax rate will rise each year until it hits 4 percent in 2025.