Optimism returns to the urea market as paper market surges pre-Indian tender; physical markets slow to react

The derivatives market based on the Profercy/ICIS fertilizer index is now at a notable premium to the physical with Arab Gulf, Nola and Egypt contract values rallying late yesterday. The past 1-2 days of trading of fertilizer futures through the CME Group futures exchange has seen optimism return to the urea market.

September Arab Gulf contracts traded above $460pt fob yesterday, up more than $15pt on last done derivatives business and some $40pt above the last physical offers for first half September shipments.

Elsewhere, September Egypt contracts traded at $450pt fob, $10pt above the previous done physical business in the region. Having traded in the mid-$420s ps ton fob Nola last week, Q4 Nola contracts have traded over $435ps ton so far this week.

The newfound optimism comes ahead of an Indian tender announcement which is expected shortly. Due to low stocks, India is expected to be in the market regularly for the rest of the year, offering a major outlet to producers, particularly those in the east.

Nonetheless, the physical market has not yet properly reacted to the substantial increases in the paper market. Egyptian producers have found demand at around $440pt fob over the last few days and in the latest business managed to increase prices to $445pt fob with a combined 80,000t of granular urea business concluded since the end of last week.

In the US too, prices increased more than $10ps ton through the day to $452ps ton fob Nola for September barges. Supply in the offseason Nola market is widely perceived to be tight near-term. This said, while Hurricane Ida has caused widespread damage, domestic urea production is not understood to have been significantly impacted. In Brazil, offers were modestly higher but business was confirmed to have taken place late last week at around $460pt cfr, a three-month low.

The index used to settle derivatives contracts in the fertilizer market is compiled using ICIS and Profercy price quotes.