U.S. Gulf: While granular prompt barges retreated a bit from the top end of their year-end close of $232-$242/st FOB, they were in bounce-back mode last week. Trades were put at $235-$238/st FOB early in the year, but were reported at $241/st FOB by Thursday afternoon, with quotes at $242-$245/st FOB for the next round of business.
Prill prices were also up at $235-$240/st FOB, compared with the prior $230-$238/st FOB range.
Eastern Cornbelt: Granular urea pricing in the Eastern Cornbelt was up from December levels. Sources quoted the market at $270-$290/st FOB in the region, with the low for prompt tons FOB Cincinnati, Ohio, and Ottawa, Ill., and the upper end out of Indiana terminals for spring prepay offers. Prepay was also reportedly being offered at $275/st FOB Cincinnati and $280/st FOB Ottawa.
“Prepay demand has been average, with some uncertainty about cropping decisions by farmers in fringe areas,” said one market contact. “The shadow of the new urea production coming online in the U.S. … is possibly helping buyers remain on the sidelines longer.”
Western Cornbelt: The granular urea market was pegged at $267-$285/st FOB in the Western Cornbelt, depending on location and time of delivery. The St. Louis, Mo., market was quoted at $267-$270/st FOB for prompt tons and $275/st FOB for prepay, while Iowa sources quoted the river terminal market at $275/st FOB for prompt and $285/st FOB for river open.
Northern Plains: Granular urea pricing had reportedly firmed to $280-$290/st FOB the Twin Cities, and up to $315/st in the North Dakota market for either delivered tons or on an FOB terminal basis.
Great Lakes: The granular urea market was pegged in the $280-$310/st FOB range, up another $10-$15/st from last report, with the low in Wisconsin for prompt tons and the upper end out of spot Michigan terminals for spring prepay offers. Michigan sources also quoted urea sales out of Burns Harbor, Ind., at $290/st FOB for take and $300/st FOB for prepay.
Northeast: Granular urea pricing in the Northeast was pegged at $270-$280/st FOB, with the low at Baltimore, Md., and the upper end FOB East Liverpool, Ohio.
China: The removal of export duties on urea for 2017 could help the struggling domestic industry. Sources said removal of the RMB80/mt (US$11.50/mt) duty on urea could help exported urea remain competitive in the global markets.
How much the lack of an export duty will impact exports is still up in the air. January and February sales are dominated by domestic demand. Sources said the combination of this strong demand and limited production has already provided strong support to pricing.
Sources reported that the current offered price for granular is $260-$265/mt FOB, with prills offered in the upper-$250s/mt FOB. One trader said buyers looking for January tons are paying that level. However, another source said some international traders took January positions at $245/mt FOB back in mid-December. At the time, that price seemed high – today, not so much.
Production was down for a good part of 2016. The central government has been leaning on less efficient and costly urea plants to shut down in favor of newer and less polluting facilities. The increase in the price of coal hastened the closures of the older plants.
In addition to increases in operating costs that are forcing plants to close, the recent move by the government to punish older, more polluting plants for not meeting emission standards has forced the issue with many plant operators.
Pakistan: The Ministry of Commerce gave its grudging approval to a plan to export 300,000 mt of urea by the end of March 2017.
When the idea was first raised last October, the implied intent was that TCP would handle the sale. One trader at the time said it made sense, because TCP is the sole importer of urea. The wording of the ministry statement, however, implies that the sale could be handled by the private sector.
The ministry said the sale could take place only after another review of the urea stockpile situation, and after companies had registered their intent to export the urea and to whom with the Trade Development Authority of Pakistan. Tonnage would then be made available on a first-come, first-served basis.
Additional tons might be made available following another review after March 31, 2017. The Pakistan urea producers said the estimated stockpiles and anticipated production dedicated to the upcoming application season will be sufficient to allow upwards of 800,000 mt to be exported this year. The producers based their estimates on having enough natural gas allocated to allow for full production.
The surplus came about as demand softened in the last half of the year and as producers received all the natural gas they said they needed to run at full capacity. Earlier in 2016, the government withheld natural gas supplies from industries to ensure a plentiful supply of gas for household use. As gas supplies improved, industries received higher allotments.
The rising prices in the international urea market will make the sale attractive to Pakistani bean counters. Sources speculated that tonnage from the sales could be used to back offers into the expected Indian tender.
India: Industry watchers remain convinced that a tender, most likely from IPL, will be called in the next week or so.
One trader noted that the government is in the middle of analyzing the consumption figures from 2016. Once done, guidance will be provided to the designated buyer as to how many tons should be purchased to close out the current season and to lay down reserves for the next.
The withdrawal of the 500 and 1,000 rupee notes by the government caused a major hiccup in consumption. Sources said large areas of the country saw urea purchases drop because farmers no longer had the currency to buy needed inputs, and local distributors refused to provide credit. Eventually, some distributors did offer credit to their long-time customers, and the government stepped in to help guarantee credit-based purchases for others.
The market appears to have stabilized, but there are still pockets of economic dislocation until the new currency situation works its way through the system.
International traders said their partners in India report there is no sense that more urea is needed immediately. As 2016 waned, sources were estimating only 300,000 mt might be needed in a January 2017 tender. Some argued that purchases could be as high as 800,000 mt, but only if the international price comes down from its current levels.
Middle East: Arab producers remain confident of their sales and their pricing ideas in the $250s/mt FOB. Nailing down a spot deal has been difficult because most of the Arab sales are formula-based. However, prices in the upper-$250s/mt FOB would be about right, because the price from Arab producers in the Gulf has been matching the price in China.
Sources reported that Iran is poised to take a lead role in the tender expected from India this month. If India only takes 300,000 mt, sources said Iran could easily dominate the tender. The main competition for the tender could come from Pakistan. Oman might also offer a cargo.
Egypt has been enjoying a steady and strong price for its product. Sources put the current price in the mid-$260s/mt FOB.
Sources reported that Egyptian product is being sent to any place that will pay. In the past few weeks, pricing of product and freight has allowed Egyptian product to be competitive in the Americas, Africa, and northern Europe. These options are in addition to Egypt’s traditional markets in southern Europe.
Black Sea: Sources report prices in the low-$220s/mt FOB out of Yuzhnyy. Material flowing out of the Black Sea port is limited because of limited production in the area.
Sellers are also finding aggressive competition from traders carrying Egyptian product into once-traditional CIS markets.
Reports are that Ukraine is poised to impose duties on Russian-made urea by the end of next month. The duties are expected to range from about 4 percent to nearly 32 percent.
Indonesia: The government has not yet set the export quotas for 2017. Sources said there appears to be no big rush to set the quotas and arrange for export contracts. Reportedly, producers are still working to ship out sales based on last year’s allocations.
Traders noted that until the new allocations are set and the government holds an auction to set who will handle the exports, no new prices are being discussed.