An atmosphere of uncertainty pervaded the industry conference in Morocco, as discussion focused on the mid-May rally in urea prices. Suppliers and buyers alike were unsure of, firstly, whether prices would continue to rise or, secondly, how long firmer price levels would persist.
As a result, few new sales were concluded during the last 10 days of May. Ameropa added to its raft of recent purchases by booking a Kuwaiti cargo at $208/t fob and 20,000t of Egyptian urea were sold at $207/t fob for July. But many doubted that the rally would last beyond June shipment and few other buyers were willing to commit at those price levels.
But supply has tightened for June loading and any buyers needing June loading are being forced to pay up, especially in the East. The Indian tender on 29 May saw 505,000t of urea sold at $211-212/t cfr, equivalent to $198-200/t fob from the Middle East, accounting for spot availability from the region for June/early-July.
The market east of Suez was much tighter than in the West; once India accounted for AG spot tonnage, all that was left for June was relatively expensive Chinese urea or even more expensive Indonesian urea.
But buyers in the West had a wider choice, with Russian granular and prilled urea still to be sold for June. Prices were lagging, still below $190/t fob Baltic for June. Competition from US exports, North Africa and AG contract cargoes in Brazil prevented any significant rise in prices.
The US market has remained very weak, with suppliers pessimistic about the prospects for any price improvement through the summer months. Low prices for urea delivered in the US interior were acting as a restraint on Nola prices. Current levels were equivalent to about $160/t fob Arabian Gulf and the US has turned into a net exporter of urea from New Orleans.
Indorama is producing urea at its full capacity of 4,000t/day at Port Harcourt. Most of its production is going to the domestic market in June. It has delivered about 50,000t of urea so far under the government’s 300,000t programme to supply blending plants throughout the country in 2017.
In the third week of May, Mopco sold an additional 25,000t of granular urea to Ameropa at $205/t fob for June shipment. On 24 May, it sold 20,000t of granular at $207/t fob for first half July shipment. Koch was rumored to be the buyer. Abu Qir had 10,000t of granular and 10,000t of prilled urea to sell for June shipment, reporting bids at $205 and $200/t fob respectively. Other suppliers were committed for June shipment. OCI was to load 25,000t of granular urea in Adabiya in June for Beira, Mozambique, sold to Meridian. Koch was to load 25,000t for Rouen, France. Urea plants in Egypt were running at 100pc of capacity due to the much improved gas supply situation compared to last year and producers did not anticipate any summer shutdowns due to limited gas availability.
Sorfert reported that it sold about 70pc of its planned urea production for June and was negotiating some spot sales for the balance, asking $215/t fob. It was still operating only one ammonia line.
Yara was to load 18,000t of prilled urea in Marsa el Brega 22-26 May for the Mississippi River.
Green Revolution held a tender on 8 May for 100,000t of urea, plus DAP, for shipment in June-July 2017. Green Revolution is part of the Agricultural Bank of Sudan, and potential sellers usually have to offer extended credit terms in order to secure business.
DAP/MAP markets begin to diverge: First the positives for producers. MAP traded in Brazil in the $370s/t cfr. OCP reported selling 40,000t at $375-377/t cfr and there were small trader sales just below that level. The Moroccans tried to bump up the price into the $380s/t cfr, but that was evidently too much for the Brazilian market. Some producers still said they were struggling to get $370/t cfr, but talk of the $360s/t cfr disappeared. Generally, although Brazilian farmer demand was still stymied, there were genuine signs of more seasonal interest for imports.
This encouraged several traders to take positions on an estimated 200,000t of 11-44 ex-China for May-early July shipment. How much of that was actually sold remained uncertain, but business took place in a reported $300-305/t cfr range. This reflected around $275-280/t fob. Another 11-44 ‘armada’ may put a cap on further significant MAP upside.
Argentina also took MAP and TSP but price details remained sketchy. MAP was supposedly done around $370/t cfr. The east also saw liquidity. Pakistan took two DAP cargoes ex-China in the low-$360s/t cfr, marginally down on last done business. It seemed likely a cut in the sales tax would offset the ending of the DAP subsidy, which was neutral for demand but good for importers no longer having to wait for subsidy reimbursement. Further demand was expected for June and July although stocks were healthy currently. In India, RCF awarded part of it’s DAP tender at a reported $361/t cfr while it emerged that GSFC bought from Midgulf. IFA saw many rumours of at least two deals, and possibly three, at $357/t cfr. While none of those deals was actually confirmed, traders reported offering at around that level.
In Bangladesh, the 450,000t DAP tender closed on 29 May and was dominated by Chinese producers. At least there was some clarity on the method of making awards, which would be as in previous years with lowest offers awarded in ascending order until the quota was filled.
OCP sold 40,000t MAP to Brazil netting the low-$360s/t fob for June shipment. It was targeting total sales of around 150,000t in May. It also sold around 20,000t DAP to Europe at a reported $375/t fob with an allocation of 50,000t. This was mostly for Mediterranean markets. It further reported the sale of 160,000t mostly 15-15-15 and also including the first cargo of a 12-24-12 deal with Angola for 4 x 30,000t loading June-August. The company plans an ambitious capacity expansion over 2017-19 which will add a further 3mn t/yr of granulation capacity. Further expansions will see capacity rise well over 20mn t/yr over the next 7-8 years.
OCP Morocco May commitments '000t
E. Europe 50-60 DAP
Ethiopia 200 DAP/NPS
W. Africa 200 DAP/NPKs
There were reports of a 10,000t DAP inquiry.
The Tanzania Fertilizer Regulatory Authority invited vendors to participate in a pre-qualify cation tender for the supply of 15,000-20,000t DAP for supply through to June 2018. Applications were requested by 19 May and results were due on 2 June.
The market was absorbing price increases in southeast Asia and Brazil, as suppliers had indicated changes to their offer prices. Canpotex is targeting a $20/t price increase in Asia- Pacific, excluding China and India, for third-quarter shipments. Several suppliers report price offers at $250/t cfr for standard MOP in Malaysia and Indonesia, and one distributor said it was in the process of finalizing volumes at $250/t cfr. BPC also recently announced its offer prices at $250/t for Malaysia and Indonesia. Whether the market would view the price hikes as reasonable remained to be seen, but suppliers were bullish that the new offers would be accepted as tender season took hold.
In Brazil, Canpotex said it sold a 35,000t cargo of granular MOP at $270/t cfr for June shipment. That follows BPC's April announcement that it had concluded a deal at the same price for June loading. The figure was deemed to be high by the market at the time, and no business had been reported at that level since, until today. Some suppliers have targeted $280/t cfr for July.
Meanwhile, talks continued with the Chinese and Indian buyers and their suppliers. Expectations were for a June settlement in both cases. It was a close call as to which country would settle first, but China had already started discussions, and some Indian firms only commenced preliminary talks in the middle of May.
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