FERTILIZER MARKET REPORT October 21, 2022

Urea markets taking a rest; awaiting final Indian tender results

Commentary from Green Markets

India

India Potash Ltd. called a urea tender to close on Oct. 17, with shipping by Dec. 5.

Sources said IPL could be looking for as much as 2 million mt in this tender. Expectations as the week ended were for the winning price to be lower than the USD$668-$675/mt CFR secured in the last tender. One trader was careful to point out that while the market dynamics support lower prices, he does not think the market will crash. Rumors of price discussions in the Arab Gulf at UD$630/mt FOB put the landed price into India around USD$650/mt CFR. At that level, said sources, IPL might be able to get the large quantities it needs. If IPL does take 1.5-2 million mt in this tender, sources said another tender may not be needed until the first quarter of 2023. If IPL takes 1 million mt or less, however, another tender will most likely be needed to finish out the application year. Sources said demand for urea remains strong. At the same time, domestic production is reportedly down because of limited amounts of natural gas. Traders also said a lot depends on the source of the urea tied to the lowest offer. If that offer comes from a trader offering Chinese product, the other offering companies may have a difficult time matching the price. While Chinese producers have long ago abandoned the idea of being low-cost suppliers, some producers have been willing to entertain bids from traders that could lead to lower prices in the market. Tenders from Pakistan and Bangladesh could affect how low producers are willing to go in pricing. The Trading Company of Pakistan called a tender for 300,000 mt of urea to close the same day as the IPL tender. In Bangladesh, the government authorized BCIC to call a tender for 60,000 mt of granular urea. While both tenders pale in comparison to the IPL tender, they could offer just enough of an alternative market to push against efforts for lower prices.

The IPL tender closed with low offers at USD$649.48/mt CFR from Ameropa for West Coast delivery and USD$655/mt CFR for East Coast delivery by AgriCommodities. A total of 2.763 million mt were offered by 13 companies. No direct offers were made by producers. The offers reflect a drop of USD$13/mt for West Coast arrivals and a decline of about USD$26/mt for East Coast deliveries.

Brazil

Last week we wrote – we believe that the recent weak demand for urea in Brazil will not push prices down dramatically.

Last week, urea prices in Brazil edged up to USD$680-$690/mt CFR on news that India was calling a new urea tender. Additional upward pressure came with news that Pakistan was also looking for tons. Sources noted that while most ports showed a price rise, some sellers were still pushing urea from sanctioned countries – Venezuela or Iran – at USD$650-$660/mt CFR. Most of these tons were being offered in southern ports. The urea price in Rondonopolis tightened to USD$785-$825/mt FOB ex-warehouse.

Last week, low demand for MAP continued to have an impact on pricing. Sources said the lower end of the range dropped, for a new price of USD$650-$680/mt CFR. The Rondonopolis price experienced a slight dip as well, moving to USD$795-$825/mt FOB ex-warehouse. The lack of demand for MAP is expected to keep exerting a downward push on prices.

Commentary from Argus

In ammonia, there is hesitancy in the European ammonia import markets with traders trying to guess how much supply will be available from European producers. Stabilizing gas costs may mean more local output. The Oman plant is still offline. Poland’s Gupa Azoty restarted most of its fertilizer production after a seven week shutdown due to high input costs. The outlook is dependent on European import demand and the US demand for the fall season.

In nitrogen it was all about India and Pakistan as the market awaited the volumes that will go into two tenders. Lowest offers into India were at USD$649.48-655pt cfr with more than 2.6m tonnes offered at under USD$660pt cfr. Counters are expected soon in IPL’s tender. With netbacks reflecting either side of USD$630pt fob Middle East, broadly in line with implied returns from shipments to Brazil, suppliers in the east are likely to look favourably on the business. Indeed, liquidity in other markets has been light for some time. Given price levels, the total volume secured by India through this tender is likely to be determined by actual spot availability. In Pakistan, only one offer was received in the tender for 300,000t, with the inquiry now scrapped. This mirrors events last year which ultimately saw urea booked on a government-to-government basis from China. Separately, production at some ammonia-urea lines in Nigeria has been impacted by heavy flooding. At least one ammonia-urea line is down. 

The outlook is firm as the market waits to see how much of Q4 length is absorbed by the Indian tenders.

In phosphate Pakistan was active in DAP buying two Moroccan cargoes, however Indian DAP buying slowed on heavy October import line up. In the west, DAP prices fell in Europe and Brazil as demand has dried up particularly as European prices are high and there is a concentration on nitrogen. The outlook overall is soft.

North America Urea Last Two Weeks

According to Green Markets, last week, NOLA urea barges started the week in the USD$600-$615/set FOB range, but dipped as low as USD$595/st on Oct. 13. Overall, the week’s average dropped from the week-ago range of USD$590-$635/st FOB.

Last week, Western Canadian Delivered urea prices were unchanged for the third week in a row at C$1,125/mt.

Earlier this week, The NOLA urea market was extremely quiet, with the last done business still assessed within the week-ago range of USD$595-$615/st FOB.

North America Phosphate Last Two Weeks

According to Green Markets, last week, sources noted softening values for NOLA DAP and MAP barges. DAP barges reportedly traded down to USD$720/st FOB for open-origin material, with trades topping out around the USD$730/st FOB mark, below last week’s USD$730-$750/st FOB range. Posted offers from domestic producers continued to be quoted at $760/st FOB. NOLA MAP barges were noted trading at a USD$725/st FOB low for non-Russian tons, falling from the prior week’s USD$747/st FOB floor. Most called the top of the market at USD$740/st FOB, below the week-ago USD$765/st FOB high. Offers for domestically-produced tons were quoted at USD$775/st FOB, with no buyers reported at that level. Due both to ongoing low-water issues on the Mississippi River and the impending shutdown of upper-river locks for the winter navigation season, sources noted an emphasis on barges already stationed at upriver locations.

Last week, Western Canada Delivered MAP prices slipped C$13/mt to $1,270/mt.

Earlier this week, nothing new was reported for NOLA DAP/MAP outside of the week-ago USD$720-$730/st FOB and USD$725-$740/st FOB ranges, respectively.