Urea barge values at New Orleans (Nola) climbed by 7pc on Monday afternoon in reaction to the US entering the escalating conflict between Israel and Iran.
Barges delivering to Nola in July changed hands at $443-450/st fob, about $30/st higher than on 20 June. August barges also transacted at $445-455/st fob.
Nola barge values have rallied by $100/st since Israel first launched strikes against Iran on 13 June following a downturn in reaction to spring demand fading at the port. The US bombed nuclear sites in Iran on Sunday. Iran then launched missiles at a US military base in Qatar today in retaliation. Qatar has been the first or second largest source of US urea imports in recent years.
The escalation of hostilities between the US and Iran puts supplies in the Middle East at greater risk of disruption. Nitrogen production in Egypt and Iran is already off line. There are also fears in the global market that Iran may try to block the strait of Hormuz, but global supply remains threatened whether that occurs or not.
The Middle East exports 21-22mn metric tonnes/yr of urea, about 40pc of global seaborne urea trade. The US received 1.6mn t, or 34pc its urea imports from the region, this fertilizer year, which runs from July through June, according to US Census Bureau data and Argus estimates. The US received roughly 60pc of its phosphate imports from the Middle East through April of this fertilizer year as well.
Nola urea prices are taking a lead from international values despite spring demand being essentially over at the port and the Middle East's shrinking share of US imports since April because of US tariff policy.
With the fertilizer offseason in the US at hand there is less urgency to attract imports, but the fall application season is closing in. In addition to reduced import availability to the US because of supply disruptions, other destinations could turn to exports from the US, a common but limited occurrence during the summer offseason.
If disruptions to global supply continue, producers will have more negotiating leverage through the offseason resulting from having more incentive to export and less imports to compete with.
The US is already facing tight supply and demand fundamentals at home. Tariffs restricted imports this spring while the largest corn crop in over a decade drained inventory across the US, likely leaving distributors and producers will little inventory leftover.
Urea affordability — measured by a ratio of urea and corn prices — is 32pc below year-ago levels. Higher pricing through the summer season will likely trim fill and prepay buying, especially with interest rates largely holding compared with last year, keeping the cost of storing product historically elevated.
