Urea: Granular supply remains tight with market buoyed by seasonal LatAm demand, grain and gas fundamentals

Global urea values have been on a firm footing, buoyed by ongoing supply challenges in the Middle East, solid grain values and advancing European gas prices.

With granular urea availability still considered tight, the prospect of new export quotas being issued in China has done little to undermine sentiment.

Sustained price gains have seen Profercy’s Nitrogen Index advance 6.3 points this week, returning to levels last seen in July.

Since the last Indian purchasing tender, which saw major Chinese participation and values below $395pt cfr, the market has quickly recovered.

Price gains have been most pronounced in the west with importers in Latin America, and to a lesser degree, Europe and the USA, actively sourcing material of late.

A number of western markets have either been behind on purchases or, as is the case for Brazil, heavily reliant on Middle East supply in previous years.

Offers in Brazil have advanced well over $460pt cfr, some $20pt above highest value trading levels last week. Further rounds of business have been concluded in west coast Mexico, with sales also taking place in Argentina and Chile in the high-$400s pt cfr.

Those with Chinese material have had little difficult placing cargoes above $400pt fob equivalent in many markets.

The offseason US market has also been responsive with import demand for Q4 vessels evident, while pre-river close barge values almost hit $450ps ton midweek, a level reflecting $489pt cfr metric equivalent. Values last week were sub-$420ps ton and had dipped below $380ps ton in second half August.

European suppliers are once again dealing with gas woes with regional gas contracts approaching $25/MMBTu midweek, values pointing to break even urea costs in the mid-$600s pt ex-works, prior to emissions costs. This has supported moderate vessel business in the high-$400s pt fob Egypt equivalent.

Of note, markets previously reliant on Iranian material have been increasingly active. There have been no reports of meaningful volumes of Iranian product entering the market for some time.

As a result, as much as 70,000t of Chinese granular has been committed to Turkey, with sales prices reflecting the low-$400s pt fob, while Russian prills have also been booked. Inquiry for shipments to Myanmar is also circulating.

Broadly, eastern markets have been more subdued. SE Asian buyers have been reluctant to engage with quotes at $430pt cfr and above while Oceanic markets are in the offseason. Consequently, granular cargoes are moving west.

Prilled buyers see no reason to move ahead of any firm news from China on the next round of export quotas.

For the time being though, granular producers worldwide are confident.