U.S. Gulf:
A perception of swollen inventories continued to weigh on the NOLA granular urea barge market, players said, while buyers largely shrugged off prior-week news of the 1.5 million mt Indian tender. Barges loading in May were reported trading in the $620-$670/st FOB range for the week, dropping from $620-$720/st FOB noted previously.
In addition to supply concerns, players noted ongoing wet weather conditions, the late start to planting in a number of areas, and increased year-over-year imports as contributing to the weak market.
Eastern Cornbelt:
Continued weakness in the NOLA urea market pressured Eastern Cornbelt terminal prices down once again. Sources quoted the market in a broad $680-$780/st FOB range in the region, down from the prior week’s $700-$825/st FOB, with both the high and low confirmed in Illinois on a spot basis. Urea pricing FOB Cincinnati, Ohio, was pegged at $725-$745/st FOB.
Western Cornbelt:
Urea pricing dropped to $680-$750/st FOB in the Western Cornbelt, down from the previous week’s $680-$790/st FOB range, with the high reported in the Iowa market at midweek. The St. Louis, Mo., urea market was quoted at $680-$710/st FOB during the week.
California:
The urea market in California was quoted at $950-$975/st FOB for bulk tons in early May, down from $960-$1,025/st FOB at last report, with the low reported at West Sacramento and the high at Stockton.
The bagged urea market FOB West Sacramento was pegged at the $1,010/st FOB level for new sales. No current rail-DEL urea prices were confirmed in the state.
Pacific Northwest:
Urea pricing ranged widely at $900-$970/st FOB in early May, down from $990-$995/st in mid-April, with the upper end reflecting the reference price FOB Rivergate, Ore. Rail-DEL offers were reported as low as $770-$820/st from Midwest shipping points.
Western Canada:
Sources reported urea pricing in a broad range at C$1,160-$1,250/mt DEL in Western Canada, down significantly from the last reported range of C$1,280-$1,350/mt DEL, with weather delays and NOLA pricing volatility cited for the drop.
On an FOB basis, Western Canada urea offers were reported at C$1,100-$1,180/mt for May, down from C$1,230-$1,345/mt FOB in mid-April. “Most retailers are selling through their position before taking on more length,” said one regional contact.
India:
The RCF urea tender closes on May 11 after a two-week waiting period from the announcement. Sources said the longer-than-usual delay was because of the EID holiday, which concluded this week.
Speculation on potential pricing was the only real activity taking place in the trading community. Sources agree RCF will most likely pay more for its urea than the $716-$750/mt CFR that IPL paid in its “mini-tender” for 78,000 mt last month. Estimates of offers start as low as $780/mt CFR and go as high as $850/mt CFR.
When RCF called the tender, it said it was looking for 1.5 million mt of urea to be awarded. Traders said under the right conditions, the Indian buying house might take 2 million mt. However, that would require a lot of parts to fall into place, not the least of which is availability of that quantity.
Sources said as things stand now, India will be short about 4.5 million mt by the end of July. This situation would require three back-to-back tenders in May and June, with each pulling in 1.5 million mt.
The big variable is sourcing the urea. Russian urea is supposed to be under sanctions because of its invasion of Ukraine. Even if India works out a way to secure Russian product, the main ports that once serviced India are in Ukraine and are currently closed.
A few small tons of Chinese urea are currently being exported, and until the end of this week, there were no indications China would release the quantities needed by India. Rumors are circulating that some traders have been picking up the small lots of urea under 10,000 mt each that the Chinese government is allowing to be shipped offshore. The purpose seems to be to build up enough tons to make an offer in the RCF tender.
However, there are now reports that China could make available 300,000–400,000 mt for export. Some traders dispute this possibility, claiming their analysis points to four or five cargoes, which would mean a maximum tonnage of 300,000 mt, but more likely 225,000 mt.
Stockpiles in China are about 32 percent below the average amount for the past five years. At the same time, Chinese production is lower than last year, when China engaged in massive exports.
The remaining sources include Vietnam, Indonesia, and the Arab Gulf. Sources said at best three cargoes might be offered from Vietnam, but only if the price is at the higher end of expectations. Indonesian suppliers made some large sales to Myanmar and the Philippines in the past few weeks, leaving fewer tons for offer to India. Sources speculated only two to three cargoes might come from there.
The last source is also the most opaque, said sources. Traders have been working to figure out how many tons Arab Gulf producers might have to offer in the tender. Unlike previous tenders, many of the producers are reportedly not talking with traders to come to agreements on backing offers into the tender. One trader was so frustrated that he was ready to tell the producers they will be on their own when the tender comes around.
Some material might also come from Nigeria and Iran. If the latter, the material will most likely be disguised as a different source.
The Indian government has stepped up its efforts to produce more local urea to avoid the high-priced imported product. Last year, the government said domestic plants produced 25.2 million mt, and imports were pegged at 9 million mt.
Already two of five new plants are operating. Two more plants are slated to start operations in December this year, and a fifth in late 2023. Even if the three plants not yet completed open on time and at 100 percent of rated capacities, the total output of the five plants will be 6.3 million mt/y. While this will reduce demand for imported urea, it will not eliminate the need.
With only two new plants already operating, India will once again have to import nearly 9 million mt to keep up with demand.
Black Sea:
The only ports operating are the ones in the southern and far eastern parts of the Black Sea. None of the ports provide enough infrastructure to make up for the loss of the Ukrainian ports, which are currently closed by Russian warships and mines.
Even without exports from the main ports, industry watchers keep calculating what the price might be if sales were to restart. The price for urea out of the area has been sliding, with the latest calculated estimate put at $660-$690/mt FOB for prilled urea.
Turkey imported 529,000 mt of urea in the first quarter of the year, according to Trade Data Monitor. This is down about 30 percent from the 757,000 mt imported during the same period of 2021. The main suppliers this year were Oman with 272,000 mt and Egypt with 125,000 mt.
March 2022 imports were reported at 190,000 mt, down 21 percent from the 240,000 mt imported during March 2021. Oman accounted for 56 percent of urea imports in March 2022 with 107,000 mt. Egypt followed with 62,000 mt, accounting for 32.5 percent of urea imports.
Indonesia:
Efforts to move up the market up to $740/mt FOB have failed, leaving the price at the $725/mt FOB settled a few weeks ago. The effort by Kaltim to move up the price came as buyers from Myanmar and the Philippines stepped into the market for some large purchases.
Tonnage available for other buyers – notably India – will be limited. Sources said a couple of cargoes might be available for the soon-to-close RCF tender. Kaltim is slated to take a turnaround this month, however, and that move will eliminate any excess product for offers into subsequent tenders.
Middle East:
Activity in the area remained quiet as the EID holiday cut into the work week and producers pulled back from talks with traders about the RCF Indian tender.
Sources said producers appear to be unwilling to commit to backing traders in the upcoming tender. One trader said he was expecting to see more direct offers from producers as a way to stem any serious price erosion.
Producers saw prices drop from $1,000/mt to the $720s/mt FOB as a result of a softening market and then IPL’s “mini-tender” for 78,000 mt. They are apparently unwilling to allow for further price drops, sources said.
Sources reported a couple of cargoes of Iranian material being shopped around at $650/mt FOB. This price is dramatically lower than the usual $10-$15/mt discount seen for Iranian product.
Egyptian producers stayed quiet throughout the EID holiday and beyond. With prices softening in the Arab Gulf and Indonesia, sources said the Egyptians appear to be waiting for the results of the Indian tender before speaking out on prices. The lack of any business means there is no way to test the assumptions that prices have fallen from the $1,130/mt FOB last achieved a few months ago. Likewise, there is no way to evaluate where the new price might be.
China:
Some pricing of the lots of 3,000-6,000 mt allowed to be exported is becoming public. Sources said the price range seems to be $680-$700/mt FOB for these small sales. This level is only slightly off from parity with the Arab Gulf, so sources said the prices sound right.
As the week closed, sources said indications were leaning to prices topping off at $740/mt FOB. Also circulating are reports that offers from China into the Indian tender could reach as high as 400,000 mt. Some traders were skeptical of this large amount, saying at best their estimates allow for 300,000 mt to be offered from China, but more likely 225,000 mt.
Green Markets analyst Alexis Maxwell reported that urea reserves in China are 32 percent lower than the average of the past five years, when exports were running high. To offer 400,000 mt would require these reserves and most of the production up to the July 5 shipping deadline set by the RCF tender.
The Chinese government remains committed to hammering down the domestic price and keeping it down. Sources said the current price is around $400/mt FOB ex-factory. Beijing, however, wants to see prices closer to $250/mt FOB ex-factory.
Clarification of the strategic reserve of urea showed that the Chinese government wanted a reserve of 1.3 million mt of urea. The initial plan appeared to involve building this reserve after the export restrictions were lifted. Now, however, it seems the urea started being put aside in February. The program is expected to be completed by June. Sources said this could mean that it might be possible for China to back sizable offers in the RCF tender, but still not with the large tonnages sent in the past.
Even if the tonnage allowed for export is increased, sources said the Chinese government will be stepping up controls over how many vessels are allowed to enter Chinese ports for fertilizer loadings. The move appears to be similar to the restrictions the government placed on vessels during the height of the COVID infection.
At that time, the number of ships were limited in each port. The crews were also subject to stringent COVID testing before being allowed to dock to load/unload their cargo. In some cases, vessels were forced to sit at anchor for at least a week, with some waiting the full two weeks for clearance.
Traders said they are already preparing for limited Chinese product to be shipped in the second semester of this year. One trader estimated exports to be only 1 million mt, which is down by almost a third. The first quarter of this year showed exports of 303,000 mt, already down 62 percent from the 802,000 mt exported in the first quarter of 2021.
Thailand:
Imports of urea in the first quarter were reported at 249,000 mt by Trade Data Monitor, down 28 percent from the 345,000 mt imported during the same period in 2021. Malaysia and Qatar each shipped about 90,000 mt in the first three months of this year, with Saudi Arabia supplying another 49,000 mt.
March imports were up 38 percent, to 138,000 mt from the 100,000 mt imported in March 2021. Saudi Arabia accounted for 36 percent of the March 2022 imports with 49,000 mt. Qatar and Malaysia came in with another 38,000 mt each.
Brazil:
Prices softened to $760-$900/mt CFR on rumors that more Chinese urea would soon be available. Reportedly, there were several bids at $700/mt CFR that went unanswered.
The expectations that more Chinese urea would be available came as sources reported China was ready to lift its restrictions on urea exports as planned at the end of May. However, the Chinese government plans to focus on building a strategic domestic reserve of 1 million mt as soon as the restrictions are lifted. This diversion of product to the domestic market, coupled with another plan to limit vessel access to Chinese ports, will keep Chinese exports limited.
Rondonópolis urea pricing was down slightly, to $900-$1,000/mt FOB ex-warehouse. The dip came in response to rumors that more Chinese urea would soon be available.