Fertilizer Market Report – August 16, 2023
Canadian West Coast Port Workers Vote Yes to Ratify a Tentative Deal; Railroad Congestion Continues
- Most of the International Longshore and Warehouse Union of Canada members voted in favor of accepting the tentative agreement with West Coast ports management.
- After the recent union strike, billions of dollars of trade are tied up in congestion as railroads and trucking companies dig out from container pileups.
- The vote means an end to the uncertainty at the West Coast ports in Canada.
Interesting Analysis of DAP vs. Urea Prices
DAP levels have jumped by US$100/mt since the end of July with India now trading at $540/mt cfr. There are a number of factors behind the steep increase, including strong demand from the Americas in the run-up to September, better-than-expected demand in India, Bangladesh tender surprise purchases, limited Chinese availability for 3Q — but also a red-hot urea market.
The chart below shows the ratio of Argus Media‘s daily DAP and prilled urea fob China prices. The lower the ratio, the more expensive urea is compared with DAP.
The ratio hit a recent low on July 28, when DAP was in the mid/high US$440s/mt fob and prilled urea was around US$380/mt fob, giving a ratio of 1.178:1. This was the most recent dip since the ratio fell to 1.13:1 towards the end of October 2022.
The ratio has since skipped back up as DAP prices have jumped. After all, with urea firm, why would DAP producers settle for lower prices given its nitrogen content?
The ratio has now moved back up to 1.37:1 as of the start of this week, with DAP at around US$520-US$530/mt fob and prilled urea in the low US$380s/mt fob.
The ratio has averaged 1.388:1 since February 2020, so we’re basically at the historical mean. But it’s worth noting the ratio has been higher this year at 1.53:1 – perhaps the ratio still has higher to climb.
Will that mean lower urea levels out of China? Or will DAP keep climbing?
It is worth noting that Chinese urea levels appear set to be tested following the tender in India, with lowest offers in IPL’s enquiry at $396/t cfr east coast and $399/t cfr west coast.
The East Coast price implies a netback of around $380/t fob China, before accounting for any margin.
North America Urea Last Week
Last week, Urea Western Canada DEL prices were flat WoW in a range of C$680-C$760/mt..
NOLA urea barge prices slipped to US$355-US$395/st FOB during the trading week, down from the prior week’s broad US$375-US$445/st FOB range. September business was reported in the US$355-US$370/st FOB range, with August barges confirmed at US$365-US$395/st FOB for new business.
Urea remained at US$450-US$480/st FOB in the Eastern Cornbelt, with the low confirmed at Cincinnati, Ohio, and the high at river terminals in Illinois.
Urea was pegged in a broad range at US$430-US$480/st FOB in the Western Cornbelt, depending on location, with the low confirmed at St. Louis, Mo.
North America Phosphate Last Week
MAP pricing in Western Canada was flat WoW in a range of C$890-C$900/mt DEL for August-September offers.
NOLA DAP barges climbed to US$525-US$545/st FOB from the week-ago US$500-US$515/st FOB, with the low side of the range reported trading early in the week. MAP barges began the week at US$600/st FOB before lifting as high as US$640/st FOB, sources said, a rise from US$580-US$600/st FOB reported previously.
In the Eastern Cornbelt, phosphate prices continued to strengthen, fueled by firming NOLA barge prices and reports of tight supply. DAP jumped to US$570-US$580/st FOB in the Eastern Cornbelt, up from last week’s US$535-US$560/st range, with both the high and low confirmed in Cincinnati during the week.
In the Eastern Cornbelt, MAP pricing was quoted at US$665-US$680/st FOB in the region, up from the prior US$635-US$645/st FOB, with the upper end of the range reported at Cincinnati.
In the Western Cornbelt, DAP prices moved up to US$560-US$580/st FOB during the week, US$20/st higher than the prior week, with the low confirmed at Caruthersville, Mo. The St. Louis DAP market was pegged firmly at the US$570-US$575/st FOB range, up from last week’s US$540-US$555/st range.
MAP pricing strengthened to US$665-US$680/st FOB in the Western Cornbelt, up from US$630-US$650/st FOB the week before, with the St. Louis market quoted at US$670-US$675/st FOB.
Green Markets Global Macro Comments – Broad Price Range in Tender Forces Counterbids
India
The urea tender from Indian Potash Ltd. (IPL) closed on Aug. 9, with 26 companies offering at total 3.4 million mt. The low price for West Coast delivery came from MacroSource, offering 45,000 mt at US$399/mt CFR. The lowest East Coast price came from Samsung, with 80,000 mt offered at US$396/mt CFR.
All other offers in the tender were priced above US$400/mt CFR. Sources said IPL sent counterbids to the 13 companies with the next-lowest offers for East Coast deliveries, and to the 11 next-lowest offering firms for West Coast arrival. Traders had until Aug. 14 to respond to the counterbids. As of Friday, reports indicated that IPL had issued counterbids to cover all offers for East Coast deliveries.
Sources expressed concern that the offering companies might not be able to respond as IPL would like. The next 13 companies offering delivery for the East Coast showed a price range of US$410-US$425/mt CFR, covering a total 1.3 million mt out of the 1.6 million mt offered into the East Coast. The 11 companies offering West Coast delivery were priced in a US$401-US$423/mt CFR range, for 1.2 million mt.
The netback to China from the lowest East Coast offer was put in the upper-US$370s/mt FOB, below what producers had hoped for, and may reduce the number of Chinese tons available for India. The netback to the Arab Gulf was put in the upper-US$370s/mt FOB.
After digesting the numbers, there appeared to be a consensus that most traders may not be able to meet the low prices set by Samsung and MacroSource. The estimated take for this tender circled around 800,000-900,000 mt, well below the 1.5 million mt that industry watchers said India needs to stay even with demand.
Sources added that if IPL couldn’t secure 1.5 million mt, the urea market would continue to strengthen as producers anticipate the next tender. If the buyer is able to pick up more than 1 million mt, however, the market could see prices softening in the knowledge that no large buying will be needed for some time.
When questioned on how urea NOLA was reacting to the India tender news, one of our sources commented on Monday: “It’s technically up a bit here, but the international market feels a bit weaker. China supplying 2/3 of the tonnage has people a little spooked, but it will be interesting to see if they (Chinese suppliers) can actually execute on all those cargoes in the short window necessary for the tender.”
Middle East
The netback from the Indian tender puts the Middle East price at US$375-US$380/mt FOB, a drop of US$20-US$25/mt from previous estimates. Sources said that even without the US$399/mt CFR low price offered into India’s West Coast, the next lowest offer of US$401/mt CFR would still lead to a netback below the Middle East’s recent US$400/mt FOB price.
Brazil
With the market at a virtual standstill due to the global focus on the Indian tender and its lower-than-expected prices, levels at Brazil fell to US$410-US$430/mt CFR from last week’s US$440-US$450/mt CFR, a nearly 5.5% decline.
China
Sources estimated the netback to China from the East Coast India tender offer at US$375-US$380/mt FOB, about US$10/mt lower than producers had expected. The price may cause producers to hesitate about making cargo available for sale to India.
Industry Tidbits
- Agricultural disasters’ spread in Alberta, but local leaders say Ottawa’s ignoring requests for help, reported National Post.
- Mosaic reopened its Saskatchewan potash plant as fertilizer demand improved.
- On Aug. 15, Mosaic Co. announced the formation of the Mosaic Bioscience™ platform, which it says will bring the latest science and innovation to the agricultural market. Technologies will enhance crop health and support the natural biology in plants and soil, ultimately enhancing yield. The portfolio includes biological fertilizer complements, PowerCoat ® and BioPath®, which improve nutrient use efficiency and enhance plant growth.
