Fertilizer Matters EP24: Australian urea market, Dec 2024

Andrea: Hello, everyone, and welcome to the latest episode of the "Argus Fertilizer Matters" podcast. My name is Andrea Valentini, I'm the VP for business development for fertilizers based in Singapore. And today we're joined by my colleague Tom Woodlock, is our market reporter based in Sydney. The topic of this episode will be the recent launch of our Australia urea price, which is an exciting development for us because it's the first time we have such a price, and I believe we are the first price reporting agency to have such a price as well. Without any further ado, Tom, please introduce yourself.

Tom: My name is Tom Woodlock, I'm based in Sydney and I cover fertilizers for Argus. Being in Sydney, I mostly focus on covering fertilizers across the Oceania region, but I work closely with colleagues based around the world.

Andrea: Fantastic. So let's jump straight into the topic of the podcast, why has Argus launched this price? And tell us more about this price.

Tom: In a nutshell, we've launched this price to bring transparency to local urea pricing in Australia. As you mentioned, Argus, I believe, is the first price reporting agency to have this kind of fertilizer coverage in Oceania, in Australia. And it's quite surprising considering Australia is one of the world's most important agricultural markets. The price is an FCA price out of Geelong, which is around an hour's drive outside of Melbourne. We chose Geelong because the port imports for most urea out of any Australian port and is the gateway to important cropping regions in the State of Victoria. And Australia became entirely dependent on imports of urea in late 2022, early 2023. That was after Incitec Pivot shut down its Gibson Island fertilizer plant up in Brisbane, and since then urea imports have flooded into Australia, and we are now pricing that urea.

Andrea: That's very exciting. So what kind of companies should be looking into this price? What kind of companies should be interested in this particular Australia-specific urea price?

Tom: I think the whole value chain can benefit from market transparency, so if that includes exporters, importers, retailers, all the way up to the end of the chain to end users, the farmers themselves. And, you know, greater price transparency should benefit each of these players.

Andrea: Excellent. And tell me again, where can this price be found?

Tom: So the new Geelong price, it can be found in Argus' global nitrogen report. The report is published every Thursday evening from London, or if you're in Australia, that'd be in the early hours of the morning every Friday.

Andrea: Fantastic. So you mentioned that a record level of urea has been imported into Australia. Can you give us a few more details about the volumes that you see flowing into the market and what kind of countries are exporting to Australia at the moment?

Tom: Yes, of course. So just this year, so the latest data is up to August, so the first 8 months of the year it was about 3.2 million tons of urea was imported into Australia. And then when you compare that to 2023, that actually surpasses all of the urea imported in 2023. And it just goes to show just, you know, how much more dependent Australia has become on importing urea. Where is it going? So I mentioned it goes into Geelong. It imports is lots of different ports, but Geelong's one of the most important, and then Western Australia. I mean, there's four ports in Western Australia that import over a hundred thousand tons per year, like Kowanyama and Albany while up in Queensland. Brisbane is the gateway to cropping areas there and South Australia, that's Port Adelaide.

In terms of the trade partners, Australia imports from quite a wide variety of sources, primarily in the Middle East and Southeast Asia. China used to be an important supplier, but following export restrictions, tons that used to come from China have been replaced with volumes from elsewhere. So just this year, the largest supply has been Saudi Arabia with the United Arab Emirates in a close second. Other notable supplies in the Middle East are Qatar and Oman, while in Southeast Asia supplies have mostly been coming from Indonesia and Malaysia.

Andrea: Very good. So you mentioned that Geelong is perhaps the largest import point for Australian urea. And so do you think that our price assessment, which is specific to Geelong, could be used as a proxy for the entire Australia urea market?

Tom: Yes, it can. To an extent it can. As you said, you know, most volumes go into Geelong, so it's a great benchmark price for, you know, even if you are importing into Brisbane or into Western Australia or elsewhere, Geelong is a great benchmark. And then, you know, prices, for example, in Brisbane could be $10 Aussie a ton higher or lower, and then in Western Australia could be slightly different as well.

Andrea: Okay. And to develop this price, obviously you have been speaking to all the key importers and distributors in Australia. So can you tell us a bit more about what are the interesting things that are happening right now in the Australian market?

Tom: Of course, there's always something going on in the world of fertilizers in Australia. So recently, Incitec Pivot CEO said the company is committed to selling its fertilizer business in the next 6 to 12 months. And that's in order to achieve what he called strategic focus for the wider company. And then there's Wengfu Australia that's also out for sale, that's following on from Wengfu Group in China combining with Kailin to form a new company. And then there's still negotiations for that takeover, which are ongoing. Just the other day, Elders, they entered into an agreement to acquire Delta Agribusiness Group for around $300 million and that would be a boost to their, kind of, fertilizer footprint across Australia. Other companies such as Newton, they're making some big moves. They recently started construction on a new fertilizer facility in Kowanyama in Western Australia. That was after a fire in February damaged some port infrastructure.

Andrea: Well, there's lots going on. So it's definitely crucial for us to have a local presence in Australia and follow this market. You mentioned earlier that Australia in the last few years has lost its domestic urea capacity. Are you expecting that any urea production will return to Australia anytime soon?

Tom: So local urea production, it should return to Australia in mid-2027, so a couple of years away still. So company Perdaman, they invested around $4 billion U.S. in a project in the Burrup Peninsula in Western Australia and that should produce, once operational, roughly 2.3 million tons of urea per year. I'm not sure how local you could call Perdaman's urea plant as the Peninsula is pretty far away from the cropping areas, especially, you know, for the East Coast of Australia. But once it comes online, we'll see some new trade flows start to develop, which should be interesting. There's another project in South Australia which could produce around a million tons of urea per year. It's by a company called NeuRizer, but that's been sidelined now for development as they're still waiting on approvals from the federal government and, you know, that may well never come, but I'll be keeping an eye on that.

Andrea: Definitely. So for the time being, we can safely assume that Australia will be a major importer of urea and, therefore, our Australian urea price assessment will be relevant for a long time. Would you agree with that?

Tom: Yeah. Well, Australia, you know, it's such an important agricultural producer and exporter and it needs that fertilizer, needs that urea to, you know, produce those crops. And, you know, with no local urea production, at least it's gonna have to import from, you know, the Middle East, Southeast Asia, maybe China if export restrictions are loosened, we'll have to wait and see.

Andrea: Excellent. Before we wrap up, Tom, could you give us an example of the current FCA Geelong Australia price and how the price has been evolving over the last few weeks?

Tom: Right now demand is incredibly low at the moment, it's very slow in the market, but some deals are being done around $660 to $670 Australian per ton.

Andrea: Very good. Excellent, Tom. This is the end of the podcast. Thank you so much for participating and, again, well done on producing this price, which I'm sure will have a big impact on the urea market. Thank you, everyone, for listening. Once again, do have a look at our Argus Nitrogen Report to find our new FCA Geelong urea price. This will complement our growing suite of prices related to agribusiness in Australia and beyond, not just related to fertilizers, but also to other agricultural crops such as wheat. So stay tuned for more updates. Thank you, everyone.