HOUSTON (ICIS)--Expectations are building that spring urea demand will begin to improve as the month concludes and that the market will be gaining further strength heading into April, especially if Brazil and India emerge as buyer in the short-term.
This anticipation of upcoming needs and the ongoing logistic struggles to unload vessels and move barges lead to more interest in both prompt and April barges with terminals also now starting to gain some additional traction in areas where weather and field conditions are turning more favourable for inputs.
A two tier market prevailed again this week for New Orleans (Nola) barges with prompt cargoes commanding a premium over any April loading.
Barges traded in the low $230s/short ton FOB (free on board) for April and the high $250s/short ton FOB for March.
As such Nola was assessed at $232-257/short ton FOB, which is an increase of $5/short ton FOB on the low side and $17 on high end of the range from the prior assessment.
While there has not been the typically flurry of spring demand, the overriding factor domestically is that the logistical problems are the main cause for the spike in the value of prompt barges, rather than it being supply or demand issue.
“The discharge of vessels is a problem and it has been that way since late February,” said a buyer. “It is becoming a question of how many barges can get discharged and out into where it is needed.”
While the jump in values were surprising to some market participants, other see the uptick as some relief but are still cautious over the course ahead.
“We had been trading so cheap for so long and I think we are probably going in the right direction but we may have gone up too high, too fast,” said a seller.
There is some expectation that after this recent run on barges to start the month that it could calm down and await the onset of more full spring buying.
“I think prices could start settling down and the trading get softer with some profit taking coming forth. There are more imports with some April vessels that are on formula and they look to be bearish on price,” said a market source.
Terminal movement has risen with some outlets seeing good demand.
Prices have also climbed and were running $285-295/short ton FOB through the week, with activity picking up where the weather has allowed some start on spring fieldwork with southern regions seeing more volumes due to generally better conditions.
While this start of the season has been challenging from many issues, the outlook for the demand this spring remains firmly strong, especially with the forecasted increased in corn acreage.
“There is going to be a lot of demand coming and there is going to be a lot more corn acreage which could equal 230,000 additional tons of urea demand. It is from both more corn planted and from the lack of ammonia that got down in the fall,” said a market source.
Focus Article by Mark Milam