U.S. Gulf:
NOLA granular barges took a steep drop to as low as $620/st FOB on April 26. The market quickly climbed back up from that point, particularly after news of the 1.5 million mt Indian tender. Early-week trades had been reported as high as $720/st with the same number being discussed again for new business at the end of the week.
Sources cited several reasons for the drop, including wet weather inland, projections of lower corn acreage, imports up over year-ago levels, and the perception that inventories were starting to swell at some inland production points.
Eastern Cornbelt:
The plunging NOLA barge market sparked a dramatic decline in pricing at regional terminals. Urea pricing slipped to a broad $700-$825/st FOB range in the Eastern Cornbelt, down from the previous week’s $810-$850/st FOB. The lower end of the range was confirmed out of Ohio River terminals, and the high out of spot Illinois River locations.
Western Cornbelt:
Urea pricing in the Western Cornbelt fell precipitously during the week, fueled by a much softer – but extremely volatile – NOLA barge market. The St. Louis, Mo., market ranged from a low of $680-$700/st up to a high of $765-$770/st FOB, depending on supplier and time of the week, down from the prior week’s $790-$800/st FOB range.
The high end of the regional urea market was pegged at the $790/st FOB level in Iowa, while the St. Paul, Minn., market was generally reported at a low of $700-$725/st FOB during the week.
Southern Plains:
Fueled by what one source described as a “whipsawing” NOLA barge market, urea prices fell to a broad $670-$775/st range FOB Catoosa/Inola, Okla., depending on supplier and time of the week, down from $790-$820/st FOB at last report.
A weekly low of $680-$690/st FOB was reported at Enid, Okla., while urea pricing at Houston, Texas, was pegged at the $730/st FOB level at midweek, down from $870/st FOB in early April.
South Central:
South Central urea terminals were quoted in the $800-$830/st FOB range in late April, with the low confirmed at Convent, La., and the high at Memphis, Tenn. Most Arkansas River terminals were reported in the $820-$825/st FOB range for new offers.
Southeast:
Urea prices in the Southeast slipped to $950-$1,010/st FOB port terminals, depending on location, down from $1,000-$1,025/st FOB at last report, with some sources citing the recent NOLA weakness for the downturn. The lower end of the range was confirmed at Wilmington, N.C., with the high reported at Charleston, S.C., and Brunswick, Ga.
“It will correct itself eventually, but not yet,” commented one source about the stronger urea market at some locations.
India:
Back-to-back tenders are expected to shake up the urea market.IPL closed a tender for 78,000 mt April 26. Before the week closed, RCF called a tender to close on May 11 with a target of buying 1.5 million mt.
The IPL tender called for 33,000 mt to be unloaded at the East Coast port of Kakinada and 45,000 mt at the West Coast port of Mundra. Sources said the tender was called to cover product that was not delivered under its February tender.
Only four companies participated in the IPL tender, and the lowest prices for each coast came from OQ Trading. The West Coast price was $750/mt CFR, while the East Coast price was $716/50/mt CFR.
| Offering Company | Quantity (mt) | US$/mt CFR | Discharge Port | ||
| OQ Trading | 33,000 | 716.50 | Kakinada | ||
| 45,000 | 750.00 | Mundra | |||
| Ameropa | 33,000 | 787.90 | Kakinada | ||
| 45,000 | 787.90 | Mundra | |||
| Samsung | 33,000 | 791.00 | Kakinada | ||
| 45,000 | 793.00 | Mundra | |||
| Midgulf | 33,000 | 819.50 | Kakinada | ||
| 45,000 | 870.00 | Mundra |
Sources said the tonnage bound for the East Coast is most likely Indonesian urea stored in a Chinese bonded warehouse. There is some speculation that these tons were originally to be included in servicing the last tender, but were withdrawn at the last minute. The cargo for West Coast delivery is expected to come from Oman.
The price reflects an increase of $120-$150/mt from the previous tender. However, the range also represents a large drop from the prices paid in the last quarter of 2021. West Coast prices in the three November and December tenders averaged $933/mt CFR, while East Coast prices averaged $949/mt CFR. Prices at that time were the highest recorded by Green Markets for Indian urea tenders.
Some in the industry were surprised at the low price offered by OQ Traders. Of particular note was that a deal brokered by OQ Trading between OMIFCO and India calls for a monthly cargo of urea for up to 1 million mt. The price of each cargo is to be determined by negotiations based on published prices.
While the price is higher than the previous tender, sources said it could have been much higher if OQ had been more aggressive. The price set in this tender will be a factor in the May OMIFCO cargo to India under the long-term deal.
No sooner had the letters of intent been sent that another tender was called, this time by RCF. Sources had expected a follow-up tender before the end of the month or in the first week of May.
The RCF tender will close on May 11. The longer than usual time between the announcement of the tender and its closing was put off to the EID holiday, which begins on May 1. The deadline to ship the tons purchased under this tender is July 5.
In the tender documents, RCF said its target purchase is 1.5 million mt. Sources said this needs to be the bare minimum the company takes. Estimates based on recent purchases indicate that even if RCF is able to purchase the full 1.5 million mt, the country will still be shy about 1 million mt. Some traders said by mid-July India will actually need to buy closer to 2.5-3 million mt to just break even on demand.
Speculation about pricing in the RCF tender started immediately. Sources seem to agree that prices will not falter from the IPL price levels. One trader said at best RCF can hope for the same prices, maybe a little more for the East Coast. The dearth of Russian and Chinese urea in large quantities could mean a tighter market, with traders jockeying to secure backing from producers as far afield as Nigeria.
The Indian government is reportedly ready to increase the budget for urea subsidies, according to local media reports. The publicized plan is to increase the current amount of US$8.8 million to US$15.6 billion.
Black Sea:
The war in Ukraine continues to keep the main shipping ports closed, denying industry watchers any solid deals to determine pricing.
Estimates of what the Yuzhnyy price would be if Yuzhnyy was allowed to ship product are based on the IPL tender results. Sources peg the price at $710-$715/mt FOB, which would be in line with the calculated netbacks to the Arab Gulf and China as well.
The Russian government announced new allocations for nitrogen exports. The limit for all nitrogen exports from April 26 through May 31 was put at 231,000 mt. The urea portion of that allotment was reported at 194,224 mt. So far, only Acron with 66,465 mt and EuroChem with 63,123 mt have publicly been given urea export allocations.
At the same time, the Russian government extended the time that export restrictions will be in place. The restrictions were slated to be lifted at the end of May, but they are now set to expire the end of August. No limits were announced for the period of June through August.
Trade Data Monitor reported June-August 2021 urea exports at 1.9 million mt. This number will be different in 2022 because of the sanctions against Russia. So far, the only 2022 export numbers released by the Russian government go through January, which was before the sanctions were put into effect.
Indonesia:
Pupuk Holding closed a tender for Kaltim, selling 45,000 mt of granular urea. The final price was reported at $725/mt FOB. The name of the winner was not revealed. Shipment for the cargo is slated for May, which could make the cargo competitive in the Indian tender as long as offered prices remain firm.
An accompanying auction for 20,000-30,000 mt of prilled urea was scrapped. The company did not reveal the best bid.
Middle East:
Oman is expected to supply the 45,000 mt awarded to OQ Trading for West Coast India delivery. The netback from the IPL tender to the Arab Gulf is put at $720-$725/mt FOB.
Producers were reportedly holding back on offering material for spot sales until the next large Indian tender was called. Now that RCF has made the call and has indicated it wants to buy 1.5 million mt, producers are expected to work closely with traders to ensure large orders and prices at least no lower than the IPL settlement.
Egyptian producers remain quiet about market conditions, and no new sales have been reported. The last public deal was more than a month ago when prices hit levels above $1,000/mt FOB. Now, with Arab Gulf and Indonesian prices falling, the Egyptian producers are holding back. Reportedly some bids to producers in the low-$700s/mt FOB have been rejected.
China:
Sources said limited cargoes of urea are being cleared for export. The tonnage is often small – no more than 10,000 mt – and at prices no one seems interested in talking about.
The netback for a hypothetical cargo out of China for the Indian East Coast, based on the IPL tender, puts the price around $690-$695/mt FOB. However, the tons flowing out of the Chinese port for India are reportedly Indonesian urea that was parked in a bonded warehouse for re-export.
The estimated price based on the IPL tender has the theoretical netback at a much lower rate than has been seen in the past. In the past few years, the Arab Gulf and Chinese prices were within $10/mt of each other. This time, the gap is about $30/mt.
Pakistan:
The Pakistan government authorized the purchase of 200,000 mt of imported urea to cover the country’s needs through September.
Government estimates state that demand for urea this season will be about 3.4 million mt, against an estimated domestic urea production output of 3.2 million mt. The need for urea also prompted the government to step up border patrols to stem what was reported as increased smuggling of urea to other countries for much higher prices.
Because of the higher production costs, the government also approved a higher price for urea, to $1,040 per 50 kg bag, or about $208/mt. Media reports noted that even with natural gas subsidized at 80 percent of its cost, producer Engro has already put its price for urea at $217/mt.
Brazil:
Urea prices are stable, with only a bit of tightening at the edges. Sources put the landed price at $815-$900/mt CFR.
Sources are reportedly concerned that availability in the third quarter could be limited because of sanctions against purchasing Russian urea and China’s continued efforts to limit its exports in favor of maintaining a large domestic reserve. The tension over how the global urea market will react to Indian tenders, just as Brazilian needs to buy, is leading sources to assume that even with stepped up production, prices could see a steady rise.
While the portside buyers see a stable market with upward possibilities, prices softened in Rondonópolis, falling to $940-$1,090/mt FOB ex-warehouse. The drop in price is attributed to suppliers offering bargains to empty their warehouses in anticipation of getting more product later.