U.S. Gulf:
NOLA urea barges spanned a broad range at $542-$578/st FOB compared to the flat week-ago $563/st FOB. Early-week trades were reported in the $560-$578/st range, but prices retreated and hit the $542/st low on Aug. 18.
Eastern Cornbelt:
The urea market was steady at $610-$630/st FOB in the region, depending on location. In the Great Lakes region, new offers FOB Toledo, Ohio, were reported at the $680/st level for October-November shipment. In the Northeast, urea pricing FOB Fairless Hills, Pa., was pegged at $650/st for August-September and $665/st for October-November.
Western Cornbelt:
The urea market was unchanged at $610-$640/st FOB in the Western Cornbelt, depending on location, with the low confirmed at St. Louis, Mo. In the Northern Plains, delivered urea pricing in the North Dakota market was pegged at $635-$650/st at mid-month.
California:
Urea pricing was steady at $710-$760/st FOB port terminals in California for bulk tons, with reference prices remaining as high as $900/st FOB Stockton for bagged product. The last rail-DEL urea offers were confirmed at the $700/st level in early August.
Pacific Northwest:
The urea market was pegged at $655-$660/st FOB in the Pacific Northwest, with the low confirmed at Rivergate, Ore. Rail-DEL pricing reportedly firmed to $650-$670/st in the region, with the low in Montana and the high in Washington.
Western Canada:
Urea prices were up in Western Canada, with August-October offers now quoted at C$960-$980/mt FOB and C$945-$980/mt DEL, up from C$855-$880/mt DEL at last report.
India:
While many in the industry said the next tender could come as early as next week, fewer are saying it with conviction. Sources are now speculating that a new urea tender call could be pushed back into the first half of September.
Sources said the Indian government is playing a very delicate balancing act. If they wait too long to call the tender, the urea will be shipped during an expected spike in energy costs as the northern hemisphere enters winter. This spike could push urea prices dramatically higher, depending on the severity of the weather.
Reportedly, the powers that be are considering making a limited call for product in the next tender. Just as in the previous tender, sources said the buyer might ask for only 500,000 mt. If the price is right, said one trader, the buyer might take more.
Local media reported that the Indian government is moving ahead with a plan to make it easier to enforce the subsidy program for urea by using debit transfers instead of cash disbursements. The plan has been in testing mode for about six years. The goal, said government ministers, is to eliminate the corruption that sprung up under the previous system.
At the same time, rumors of potential adjustments to the maximum price of urea to match the increases paid for the imported product were quashed by the government. Urea subsidies take up the single largest portion of the budget allocated for fertilizer support to the farmers.
China:
Bloomberg reported that extreme heat and higher fuel costs have forced some urea producers in Sichuan to shut down. Sources told Green Markets that the producers were small compared to the major companies, but serve as indicators of how dire the situation in China has become for producers.
Traders said even if the plants did not close down because of the reasons given, they would have been forced to do so eventually. The domestic price for urea has been sliding. Sources said for many of the smaller producers, the selling price of urea is already below their production costs.
The soft domestic price is directly tied to the export restrictions imposed by the central government, sources reported. Expectations were growing that as the slack use season approached in China, the government might be willing to make urea more readily available for export. However, no changes in the export regulations have come through. Sources now report that producers have been approached by government officials saying the restrictions are expected to remain in place through 2023.
Local sources reported that about 193,000 mt is stored at portside warehouses. International traders speculated the amount is actually less. Sources also said it is possible that not all the tons have been cleared for export. Some Chinese traders may have moved the tons to the ports in anticipation of the Indian tender or other deal.
Positioning material at the ports is important, said one trader. Once approval is given to export the product, the seller has about 60 days to get the urea on a vessel. If the urea is already at the port, then the only delay would be securing a vessel.
Indonesia:
Reports are circulating that Kaltim V may be able to resume urea production as early as October. Sources said the company will most likely be bringing in ammonia from other Indonesian plants to get its granular line working again.
One international trader said it makes sense for Kaltim and the Indonesian government to expedite the restarting of the Kaltim V plant. Sources said it is the most efficient of the urea production facilities in the country. Once it gets the ammonia it needs to produce urea, the plant should be able to service domestic and international buyers.
Reportedly, the government is also looking at trying to convince farmers that prilled urea works just as well for them as granular. If the switch can be made, sources said that would free up the much-desired granular for export.
Sources said a selling tender for 30,000 mt of granular and 12,000 mt of prilled urea closes on Aug. 18. Traders speculated that if asked, more prilled urea might be made available.
Middle East:
Rumors abounded about multiple urea sales from Arab Gulf producers and Iran.Reportedly, two cargoes of Arab Gulf material were sold at $556-$560/mt FOB for shipment by the end of August. Sources could not confirm the seller, the trader, the buyer, or the tonnage. The only part that all could agree on was that the holder of the material had to liquidate his holdings and move quickly at a less-than-market price.
At the same time, reportedly two cargoes of Iranian material were sold at $500/mt FOB for buyers in Africa. A third cargo, at the same price, was reportedly sent to Brazil.
Reportedly, European buyers have been looking for more material. The current price of natural gas puts the cost of producing 1 mt of urea at $1,900/mt. At that level, the industry sees more benefit in importing than producing. Arab Gulf and Egyptian producers have also seen the desire for more material and are digging in their heels to prevent any slide in pricing.
Bloomberg reported that the Thai and Saudi governments are in talks to ensure a steady supply of low cost urea to Thailand. Reportedly, the Thai government is looking for 800,000 mt of urea for next year.
According to Trade Data Monitor, Thailand imported 828,000 mt of urea from Saudi Arabia in 2021 and 1 million mt in 2020. The Saudis have long been a major supplier to Thai buyers. The value the Saudis put on the Thai market has been seen in the prices paid for the product. Often the landed CFR price paid by Thailand is about the same as the FOB price the Saudis quote to other buyers. By taking a lower netback, the Saudis have locked in the Thai market.
Egyptian producers have gone quiet as talk circulates of softer prices. Sources said offers are now closer to $720/mt FOB on the heels of late-July business of $765/mt FOB.
Egyptian producers are also watching to see what happens in Europe. If the EU changes some of its import duties, Nigerian urea might become more attractive to European buyers. This challenge could force Egyptian producers to face competition in a market they have dominated for several years.
Nepal:
A urea tender for 27,500 mt closed this week. No details have been released of offering companies nor prices.
Black Sea:
Bloomberg reported that the EU has clarified its sanctions on handling Russian products.
New restrictions against importing Russian coal and some fertilizers into the EU took effect on Aug. 10. In its clarification, the EU said that even if the sanctioned materials are not heading to European buyers, companies operating within the trade pact boundaries are also not allowed to facilitate the sale or handling of the product. Sources said this means that EU-based companies cannot finance or insure the goods.
Exceptions are available for some fertilizers and food stuffs. However, the latest EU statement underscored what many international traders have been saying ever since sanctions were imposed on Russia for its invasion of Ukraine.
The traders noted that fertilizers were never on the sanction list. However, all the finances around purchasing, shipping, and delivering the product could be governed by the sanction’s protocols. One trader noted that even the smallest error in the paperwork could leave a bank or insurance company open to an investigation by the EU or US government over potential sanctions violations.
The transport of Russia urea out of the Black Sea remains opaque. Sources estimate netbacks based on speculation of cargo size, potential destination, and possible freight rates. The current estimate for the netback to a port on the east side of the Black Sea – the only ones operating outside the war zone – is $490-$530/mt FOB.
Turkey:
Urea imports for the first half of 2022 were reported at 1 million mt by Trade Data Monitor. This amount is about 30% down from the 1.4 million mt imported during the first semester of 2021. Urea from Oman dominated the imports at 531,000 mt. Egyptian material came in a distant second at 148,000 mt.
Second-quarter imports were reported at 477,000 mt, down 29% from the 675,000 mt imported during the same period of 2021. June 2022 imports of 181,000 mt were down 12% from the 206,000 mt imported during June 2021.
South Korea:
Urea imports for January-July were reported at 610,000 mt, up slightly from the 575,000 mt imported during the same period of 2021. Trade Data Monitor reported that China was the single largest supplier with 206,000 mt, followed by Qatar with 157,000 mt.
July 2022 imports were down nearly a half, dropping to 49,000 mt from the 87,000 mt imported during July 2021. China once again dominated the supply with 38,000 mt, accounting for 78% of the import market in July.
Brazil:
Prices began sliding early in the week and settled down to $600-$620/mt CFR. Even with the price slide, Brazilian and international traders said prices will go lower. The week closed with buyers quoting $570/mt CFR as their starting point.
Sources said price corrections are not unexpected during the current slow season. The buying that is taking place seems to be small quantities in a hand-to-mouth pattern.
Rondonopolis is reported at $800-$815/mt FOB ex-warehouse. Sources said buying appears to be put on hold until the fourth quarter. Reportedly, buyers are looking at the forecasts for the 2023 corn season before making any purchasing plans.