Brea, CA – June 15, 2011
From time to time, CDI sends out market assessments when we see odd, perturbing, or disturbing events occurring in the urea market place. Now is such a time. Urea prices have skyrocketed over the past two months, an event which not only has shocked us but also the rest of the industry. Initial causes were flooding, closures throughout the Mississippi River, plant outages, rebuilding of low inventory stocks, the forward strength of the grain markets and speculation here in the U.S.
Over the last week, however, an additional and more serious event has occurred which has world wide implications. China is normally a big exporter of urea especially during the second half of the year. There is now a growing realization that China will not be the big export player that it was last year due to a tougher export tax policy. Consequently, there is now a scramble worldwide for product from other origins. For the U.S., what had been a temporary shortage due to natural disasters here at home has now become a world shortage for everyone.
The net result has been a dramatic increase in prices. The U.S. Gulf has seen a run up in prices of $45-$50 per ton in just the last week over and above the price jumps of the last month. A $50 per ton increase in dry urea translates to the following for:
32.5% Urea Solution = $0.1136 per gallon
40% Urea Solution = $0.1174 per gallon
50% Urea Solution = $0.1191 per gallon
Prognosticators such as Green Markets and Profercy are now forecasting (1) that world inventories of Urea will remain tight, especially July through December, (2) there will be no major build-up of producer inventory – product will be sold as it is produced, (3) any price reversals will be temporary, and (4) prices will continue to trend upwards.
The general conclusion is that there appears to be no mitigating circumstances that could reverse these price trends, at least over the short term.
UREA PRICE TRENDS
| Granular (dry) Urea $/ton | 50% Urea Solution | |||
| New Orleans (NOLA) FOB Barge$/ton | $/gal | |||
| Last Year | Low | High | Low | High |
| June 14, 2010 | $222 | $240 | $0.53 | $0.57 |
| Past Quarters | Ave | Delta | Ave | Delta |
| 4th-2010 | $364.79 | $0.87 | ||
| 1st-2011 | $370.27 | $5.48 | $0.88 | $0.01 |
| 2nd-2011 | $393.59 | $23.32 | $0.94 | $0.06 |
| Past Months | Ave | Delta | Ave | Delta |
| April – 2011 | $330.75 | $0.79 | ||
| May – 2011 | $390.50 | $59.75 | $0.93 | $0.14 |
| June – 2011 | $459.50 | $69.00 | $1.09 | $0.16 |
| Past Weeks | Low | High | Low | High |
| May 23, 2011 | $400 | $405 | $0.95 | $0.96 |
| May 30, 2011 | $422 | $435 | $1.01 | $1.04 |
| June 6, 2011 | $435 | $440 | $1.04 | $1.05 |
| June 13, 2011 | $465 | $498 | $1.11 | $1.19 |