TC of India bought over 1.3m tonnes of urea under its 19 May tender in a move that will support prices for June shipment. The total is at the high end expectations and comes despite a build-up of inventories in India.
STC bought the urea in the range $214.39-$216.89/t cfr depending on discharge port. This is equivalent to breakeven levels around $207/t fob China and the Middle East.
Traders have bought about 400,000t of Middle East urea for India, mostly at prices below $205/t fob. Algerian (for the first time), Egyptian and Black Sea urea have also been sold at prices of $192-195/t fob.
But Chinese suppliers are refusing to sell at $207/t fob and most are asking $210-212/t fob for prilled and granular urea for shipment to India.
Many observers, though, expect prices to fall further in the third quarter, the period when Chinese export supply normally increases and the harvest/holiday season cuts demand in North America and Europe. Paper market prices are showing bids at $180/t fob for AG granular urea in Q3.
Mopco and Helwan have been active sellers of granular urea this week, placing 170,000t of urea for end-May/June shipment to various destinations.
OCI has also been discussing 50,000t for India, for shipment from Adabiya. Only one of the EFC plants is operating at present and it is not clear whether sufficient product is available for shipment from the Red Sea port.
Egypt’s President Sisi officially opened the new Mopco 1 and 2 plants on 24 May and Mopco now has all three urea plants operating.
Keytrade has bought 45,000t of granular urea from AOA for June shipment to India. The price is understood to be $192-193/t fob. Freight is estimated close to $20/t.
Sorfert has loaded about 65,000t of urea so far this month and three vessels scheduled to load another 19,000t. It is reported to be willing to sell on a fixed price basis for June, moving away from the Egypt plus formula utilised until recently.
Phosphate prices remained flat-to-soft in May. Fundamentally, west of Suez, increased Chinese 11-44 availability hangs over the market. Limiting 11-52 MAP upside. Port stocks were pegged at around 180,000t and liquidity had reportedly ramped up at around $280/t fob equating to the low/mid-$290s/t cfr Brazil. It is still hard for traders to make much margin given freight around $16-19/t.
Producers will want to at least hold the MAP price in Brazil for June. OCP intends to ship perhaps 200,000t MAP/NPS/DAP and eventually sold mainly in the mid-$350s/t cfr. Moreover with the US domestic waning and increased Australian availability following losses in Pakistan and Bangladesh and a continued Saudi presence as well as trader positions on Russian and Moroccan, it is hard to see much upside.
OCP began to shore up June commitments with another cargo of MAP sold to South Africa and a DAP/MAP cargo to Argentina/Uruguay taken by a trader. It also commenced its shipments to the US.
As dull as it sounds, it is hard move away from an expectation of essentially flat pricing in June. Fundamentally the market is still oversupplied and producers will have to work hard to maintain prices. The possibility remains that Brazilian MAP and Indian DAP demand will pull producers in opposite directions, creating a spike in prices, but this looks unlikely given current supply globally.
OCP begun to build its June line up with the following DAP/MAP sales:
a third MAP cargo for South Africa sold under formula
40,000t DAP/MAP to a trader for Argentina/Uruguay sold in the higher $340s/t fob
1 DAP/MAP cargo to the US
Around 50,000t DAP will also ship to Bangladesh in July under the government-to-government agreement.
There is no progress on a 2Q phosphoric acid agreement with Indian buyers but OCP continues to ship to long-term partners on consignment. Reports of a 2Q-3Q agreement have been denied.
GCT has sold 25,000t DAP to Turkey for May shipment at $350/t fob with 90 days' credit. It is running at 60pc of capacity. The European target price remains $370/t fob but this is hard to achieve given the lack of demand.
Annual Chinese contracts are yet to be agreed, creating uncertainty in the global market. Indian contract talks for 2016-17 were yet to formally start and cargoes continued to arrive under old agreements. Brazilian MOP prices were holding steady and improved demand seemed imminent.
The Southeast Asian tender season gathered pace but reduced crude palm oil (CPO) production was softening the outlook. The European season was coming to an end and MOP prices, currently among the highest globally, were under concerted downwards pressure. US prices eased back after a period of stability. How the market developed over the coming weeks would be hugely significant in determining the course for the remainder of the year.
MOP producers have taken steps to redress the supply/demand imbalance and the spot price declines have slowed in most major markets. These production cuts will likely have a greater impact during the remainder of the year as spot buyers look to replenish stocks.
Overall, MOP buyers lack confidence and will be looking for some assurances onwards. Buyers are risk averse and are not willing to build stocks in an uncertain market. The outlook remained weak, but this could change if a sizeable development boosted confidence in the coming weeks.
Compagnie Fruitiere remained in discussions with traders for its second half 2016 fertilizer requirements for Ghana, Cameroon, Senegal and Ivory Coast. Various fertilizers were being requested including 1,800t of standard MOP and 90t of SOP.
It is understood Trammo recently sold 4,000-5,000t of granular MOP to a buyer in Abidjan, Ivory Coast at a price around $245/t cfr for May/June shipment. The MOP was of Canadian origin.
Further to previous sale to OCP, BPC was in the market for 20,000t of MOP loading in Klaipeda mid-May for shipment to Jorf Lasfar.
Iberpotash/ICL had also been checking freight from Barcelona/ Tarragona to Jorf Lasfar for 10,000t of MOP loading slightly earlier in May.
Source: Argus FMB
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