Fertilizer Market Report – August 2, 2023
News of the Week:
July Average Urea Prices Weaker in Western Canada, Firmer at NOLA Versus June
Finally, it’s the time to change my tune on fertilizers in Western Canada. If you have storage, I recommend you start inching into the urea and phosphate market as tight supplies globally are supporting prices, as we explain throughout this newsletter.
The first three weeks of July were weaker month-over-month for urea Western Canada delivered and then jumped significantly to a range of C$665/mt-C$680/mt, up 22%, in the fourth and final week of July.
Urea NOLA rose each week in July.
Summary of the Global Urea Market from Argus Media
Urea prices rose by another 10-15% last week, driven by supply cuts in APAC and Nigeria, and high demand. Demand was centred among US, Brazil, Argentina and northwest Europe.
US urea prices rose US$66/t through the course of the week. A July barge sold at US$445/st fob on Friday, with August trading US$400-US425/st fob.
India’s INDIAN POTASH LIMITED will close its urea tender on August 9, with expectations of purchases of 1+mmt.
Chinese urea supply is tighter as some provinces have slowed the issue of export permits — and prices for prilled and granular urea rose by around US$45/t this week to US$380-US$400/t fob.
Urea in Brazil closed the week US$40/t higher, touching US$430/t cfr.
North America Urea Last Week
According to Green Markets, the latest urea offers were quoted at C$635/mt FOB and C$665-C$680/mt DEL in Western Canada for September-October shipment, up from the prior C$530-C$535/mt FOB and C$535-C$568/mt DEL ranges for July-August tons.
“Urea offers are scarce right now,” said one contact, adding that local manufacturers had a strong book on through September and into October.
NOLA urea barge prices remained volatile, ramping up as the week progressed. Trades firmed from a low of US$355-US$360/st for August-September business early in the week, climbing to US$390-US$410/st FOB at midweek and topping out on July 27 at US$425/st FOB for August and US$415-US$420/st FOB for September.
The range jumped from the previous US$335-US$365/st FOB, with sources describing a market that is “on fire” in the wake of the new India tender and rapidly firming prices in China, Brazil, and the Middle East.
Urea prices jumped to a broad US$425-US$460/st FOB in the Eastern Cornbelt on firming NOLA barge values, up from last week’s US$395-US$420/st FOB. Sources pegged the Cincinnati, Ohio, urea market in the US$440-US$460/st FOB range for the week.
Urea moved to US$430-US$460/st FOB in the Western Cornbelt, up significantly from last week’s US$370-US$400/st FOB range in the wake of stronger NOLA barge pricing, with the St. Louis, Mo., market reported at US$430-US$455/st FOB.
The Northern Plains urea market jumped to US$475-US$485/st FOB St. Paul, Minn., with the Catoosa/Inola, Okla., market pegged at US$475-US$480/st FOB for very tight supply.
North America Phosphate Last Week
MAP pricing in Western Canada strengthened to C$845-C$895/mt FOB and C$890-C$900/mt DEL for August-September offers, up from the prior C$815-C$830/mt FOB and C$810-C$825/mt rail-DEL levels. “It’s been a tough week for price discovery, with most pulling offers end of last week when NOLA moved up aggressively,” reported one contact.
Sources noted NOLA DAP trades in the US$470-US$500/st FOB range, increasing from last week’s US$445-US$470/st FOB. Short-covering by MAP buyers was reported pressuring the NOLA market to US$535-US$585/st FOB, up from the week-ago US$480-US$530/st FOB.
In the Eastern Cornbelt, MAP jumped to US$595-US$625/st FOB, up US$45-US$55/st from the prior week, with the high confirmed at Cincinnati. “It seems everyone is talking about extreme tightness in MAP this fall,” commented one regional source.
In the Western Cornbelt, MAP moved to US$590-US$630/st FOB for new offers in the region, up US$65-US$70/st from the previous week.
Green Markets Global Macro Comments – Looks Like India is Tempting Fate
India
Indian Potash Ltd. (IPL) called a tender during the week. Set to close on Aug. 9, the tender carried a shipping deadline of Sept. 26. Sources speculated that IPL will be looking to secure at least 1.5 million mt of urea.
Normally, a tender will close one week after the call. The roughly two-week gap in this tender was most likely granted to help traders secure the tonnage for offers, sources said. Others speculated the longer period could have been announced in the hope of cooling off the market, however, which became red hot just as the tender announcement was made.
If the latter is true, then IPL failed; but in case the former is accurate, the move is expected to work.
Since clearing tons for export could be time-consuming, the longer period before offers were due, along with the almost two-month shipping period, appeared designed to make it as easy as possible for traders to offer tons from China to play off of Arab Gulf producers. Even with the extra time, sources said traders were unlikely to offer multiple cargoes from China out of concern that export clearances might not be completed for large orders. Instead, most are expected to offer one or two cargoes of Chinese product.
As soon as the tender call was made, some traders began speculating that prices could come in at US$380/mt CFR, or about US$100/mt above the last tender. A US$400/mt FOB sale by SABIC made on the heels of the tender, along with subsequent statements from Chinese producers targeting similar prices, pushed pricing expectations even higher.
International traders looked at the US$400-US$415/mt CFR being traded into Brazil, noting that sales into the Latin American country are often a good indicator of where the Indian price might go.
There were speculations that the initial US$380/mt CFR pricing idea could still be achieved with some aggressive negotiating. Even if the netback was significantly lower than the prices achieved this week, they would still be substantially higher than what was received under the last tender.
IPL is facing another problem, as sources reported that Bangladesh was also close to finalizing a urea tender of its own. While one trader said Bangladesh would likely settle its tender as a government-to-government deal with China, this could absorb a lot of urea from China, which otherwise would have been offered into India, leaving fewer tons for traders.
Middle East
Urea prices exploded across the region. SABIC reported a 40,000 mt granular urea sale at US$400/mt FOB. At the same time, the price out of Egypt climbed from US$436/mt FOB at the beginning of the week to US$467/mt FOB on July 27.
All of the Arab Gulf producers are now following Saudi Arabia’s lead by pricing their material at US$400/mt FOB. One trader noted that even at US$400/mt FOB, the price was a bargain for European buyers. Once the freight differential between the Arab Gulf and Egypt is calculated and the European duty of 6% is tacked on, Arab Gulf material is still cheaper than the most recent Egyptian price.
The issue is whether tons are available. Sources said producers claimed they are sold out well into August and are unwilling to discuss lowering their prices. The market’s tightness has raised questions as to how many tons Arab Gulf suppliers will be able to offer to traders for the IPL tender.
Brazil
Urea prices rallied to US$400-US$420/mt CFR following the July 25 Indian tender announcement, lifting from last week’s US$370-US$385/mt. Noting both increased demand from importers and a lack of offers from suppliers, players expected a lift to US$430-US$440/mt CFR soon.
China
Immediately after SABIC closed a deal at US$400/mt FOB, Chinese producers tossed out their old price ideas, informing traders that their price was also US$400/mt FOB. So far, deals have not been made at this level. Buyers were reportedly looking at business done just one week ago in the US$340s/mt FOB for granular urea and the upper-US$330s/mt FOB for prilled product and trying to understand what just happened.
The end of China’s domestic season and steady levels of urea production are building up reserves that could be offered in the IPL tender, sources said. The longer period to prepare offers and ship the product seemed designed to take into account China’s laborious process of clearing urea for export.
Chinese traders were reportedly working the phones to secure cargoes from producers and then offer those tons to international traders for the Indian tender. Sources speculated that some producers might be willing to accept less than the current desired price of US$400/mt FOB. Even if pricing drops to cover an Indian price of US$380/mt CFR, that level will be higher than the current market, and significantly higher than China’s netback from the previous tender.
Industry Tidbits
- Members of the International Longshore and Warehouse Union (ILWU) Canada on July 28 voted on a tentative labor contract with the British Columbia Maritime Employers Association (BCMEA), just a week after union leadership rejected the contract and strike activity temporarily resumed at the Port of Vancouver (GM July 24, p. 1). There was no announcement on when the voting results would be made public, but dockworkers are back on the job at the ports Vancouver and Prince Rupert after ILWU leadership issued and then rescinded a strike notice on July 18 as negotiations resumed.
- BHP Ltd. reported that its Jansen potash project, under development 140 kilometers east of Saskatoon, Sask., is “tracking to the accelerated plan” with first production still targeted for the end of the 2026 calendar year.
- Nutrien Ltd. confirmed on July 31 that it has closed its summer fill program for third-quarter potash deliveries at US$370/st FOB Midwest terminals and is now taking orders for fourth-quarter potash shipments at a US$400/st FOB Midwest reference price. Nutrien reported an “overwhelming response” to the fill program, which was launched on July 21, and said reference prices for 4Q are subject to change at any time.
- Chemical, fertilizer price slides may be near bottom, reports The Western Producer
- Robert Andjelic owns more farmland than anyone else in Canada. Here’s why he says higher food prices are here to stay
