As the spring season comes to a conclusion, Urea demand remains slow in the United States, Europe, and Brazil, where the major Urea purchasing season for the second half of the year is still a few months away. One ray of hope is that freight rates to locations east of Suez have been cut in half in recent weeks, which could moderate FOB prices for producers.

This week saw another sharp drop in feedstock Ammonia prices as European manufacturers were encouraged to start up by reduced costs in Europe, and as a result, demand for imported Ammonia decreased. As a result, Ammonia exporters are under pressure to sell their stock or contemplate reducing production.

The Mosaic and Yara agreement for the June Tampa Ammonia contract is USD 340 CFR, which is USD 40/MT less than the prior agreement. The price of TTF gas in Europe has fallen below the USD 10 MMBTU threshold, bringing the cost of Ammonia production in Europe below USD 350 plus carbon tax. With buyers staying away from new volumes in Europe and low pricing for processed Urea, there is no support for rising Ammonia prices. In the Far East, prices have stayed constant at USD 300/MT CFR.

The Middle East FOB price of Urea declined by over USD 25/MT due to trades into Asia, bringing it below USD 300/MT. This will have the unintended consequence of lowering Asian import prices, forcing Chinese Urea exporters to decrease their pricing in order to compete. The Brazilian price fell roughly USD 15/MT to near $300/t CFR (delivered), implying that any major exporters, such as the Middle East or China, will have to lower their prices considerably further. With only the next Indian tender to look forward to, these Urea manufacturers will hesitate to pass up any prospects in Brazil.

In conclusion, this week's annual fertilizer conference in Europe turned into a depressing occasion with little to no good news aside from the "imminent" nation of India regarding a potential Urea tender. These Urea manufacturers will not want to pass up any opportunities in Brazil because there is not much fresh business available besides the next Indian contract.