This may have been the period that urea prices finally bottomed out. A combination of increased activity, rumours of a new Indian tender and some supply cuts tightened the market for August shipment, stabilizing prices and pushing them up in some areas.
Traders bought Middle East urea at $185/t fob, up $4/ton. US prices have risen $10-15/st from their low point and, for the first time in three months, Brazilian prices have not fallen: in fact, they have risen by about $5/t to around $200/t cfr.
Although Chinese urea prices have continued to weaken, this represents an adjustment to restore competitiveness and several sales of granular urea have taken place now that fob levels have dropped to $185-188/t.
It remains to be seen whether there is a significant rebound in price. The last two times urea found support, there was a 2-3 week rally after which prices began to fall again. A similarly short-lived rally is likely this time, but the prospect of further falls below current prices is less likely. This is because the market will enter into an active demand phase in September and October and because prices are at the level where Chinese exports will be cut due to the losses made by producers there.
The other major market to watch is the US. Low prices for the past two months have cut the amount of urea being shipped there significantly. Currently, only about 270,000t of offshore urea is scheduled to load for September arrival in the US, and only about half of this in Nola.
Indorama sold two spot cargoes of granular urea for August loading. Nitron purchased a second 20,000t of granular urea for Argentina/Uruguay, priced in the low- $180s/t fob. Ameropa has bought 30,000t for Latin America and is expected to ship to Brazil. Loading of these two cargoes has been delayed due to priority being given to domestic sales and technical issues to be resolved before the new plant is handed over by the contractor.
The first vessel to load urea for export from Indorama's Port Harcourt facility, m/v Delta, will complete loading 20,000t for Nitron/Argentina.
Indorama was also reported to have shipped around 15,000t of granular urea to Senegal from its new plant at Port Harcourt.
Trammo sold 20,000t of prilled urea for end-July shipment to Abidjan, understood to be for Mali. It also loaded 13,000t of prilled urea in Yuzhny for Senegal in July.
CotonChad closed a tender on 5 August for lots and 6,000t and 5,000t of bagged urea, plus NPKs.
The gas supply situation for August remains uncertain and Egyptian producers are reluctant to sell any more urea until they know what production levels will be next month. EFC and Mopco have urea to sell and are asking for $190/t fob if approached.
Traders are inquiring for urea for first half August shipment to Turkey and Bulgaria but are finding little available. Nitron is reported to have bought 4,000t from Helwan for prompt shipment to Turkey. Ameropa is in the market for 15,000t to load prompt in Damietta for Iskenderun.
India still looks set to buy healthy volumes (2-2.5mn t with 3mn t already secured for the fertilizer year). Pakistan has withdrawn from the market due to the lower numbers offered in India but similarly still needs to buy heavily and further demand will be evident for September arrival.
11-52 MAP is a different story. Both OCP and Russian producers have scant availability for August shipment which is keeping prices stable. OCP reported selling 150,000t MAP and NPS to Brazil at a roll over from July in the low/higher- $350s/t cfr while Profertil is reported to have covered its requirement in the mid-$350s/t cfr from Ameropa. Traders have little 11-52 in their hands and are bemoaning the lack of availability. Argus FMB has accordingly assessed the Brazilian MAP price higher at $353-358/t cfr for 11-52.
The US DAP barge market traded heavily with 23 confirmed deals, and prices ticked up to $306-312/st fob Nola.
On the supply side, PhosAgro, EuroChem and Pemex have little to sell in August. Only JPMC had much carry over from July. Sentiment thus very much depends on Chinese strategy over the next few weeks. Clearly, hitherto, Chinese DAP producers have limited exports and streamlined production to balance the market. Latest GTIS numbers indicates DAP exports were down more than a quarter for the 1H of 2016 at 2.1mn t while MAP exports were down 41pc to 825,000t. DAP shipments to India and MAP to Brazil were the most affected.
It thus seems clear that so far the play to keep Chinese MAP out of Brazil has been effective and demand is primarily for 11-52. Total MAP demand of around 1mn t needs to be covered to year end.
DAP shipments to India will most likely ramp up as overall, we still expect imports here to be significant at 5-5.5mn t of which Chinese producers will garner the lion's share.
In this scenario, upside west of Suez still remains limited but stability at least looks the most likely outcome. East of Suez, in India prices are under some pressure, but Chinese producers will resist lower levels and there are still good margins to be made at current cfr prices.
Algeria's Asfertrade announced a tender closing 2 August for 40,000t MAP for delivery in several lots before October 2016.
OCP firmed up its August commitments with the following sales reported:
* 150,000t MAP/other phosphates to Brazil sold at a rollover price from July in the $350s/t cfr
* 2 DAP/MAP/NPS panamaxes to the US loading under the usual formula
* 120,000-130,000t DAP/MAP (70:30 split) to Europe in a $345-350/t fob range
* 100,000-110,000t DAP/NPKs to African markets
July commitments for India (50,000t) loaded in early August.
Burkina Faso's Ministry of Agriculture issued a tender closing on 8 July, requesting 3,038t of 15-23-14 along with 1,066t of urea and 963t of DAP. Shipment was requested within 30 days of award.
The potash market continued to focus on the big contracts in China and India last month. ICL finalized contracts for 700,000t of MOP to China, following on from BPC, which agreed to supply China with 1.3mn t during the remainder of the year. In India, Canpotex is the fifth company to agree a deal to supply MOP, and others await finalization in the next few weeks.
All the contract activity has provided price stability in a market that badly needed some certainty. The first half of this year was dogged by a lack of spot demand as buyers waited for the elusive China contract to emerge and agreements to be reached in India. The raft of completed contract deals has provided a small ray of sunshine to producers, leading PotashCorp to call a bottom to the market in its company results.
Brazil continues to see spot price increases, as buyers and sellers take stock of global contract prices in India and China. Certain sellers now have substantial MOP commitments outside of Brazil, which may mean they are more reluctant to accept lower offers in what is always a highly-competitive market. Brazilian granular MOP prices have risen to $225-235/t at the end of July, the third consecutive increase, despite unexceptional demand.
Overall spot activity remains muted for now, as buyers and sellers continue to move towards price alignment. Although early indications are that prices could begin to firm in some markets over the coming weeks, any upward movement will be curtailed by a general global over-supply of MOP.
Most MOP demand was confined to small lots below 1,000t across various West African countries. Among them, a Nigerian buyer was in the market for up to 500t of MOP for end-July/early August shipment.
BPC was checking freight for 6,200t of MOP for shipment to Abidjan, Ivory Coast loading 22-24 July in Klaipeda.
Canpotex confirmed that it recently sold an MOP cargo to OCP in Morocco at an undisclosed price. Market reports of an agreement below $200/t cfr were categorically denied. It is understood the cargo is 30,500t of MOP loaded on 16-20 July in St John, Canada, for shipment to Jorf Lasfar.
Source: Argus FMB
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