Dry Bulk Commodity Update (19 June 2019)

scrap metal shippingRussia said it will begin enforcing regional quotas and limiting its exports of ferrous scrap beyond the Eurasian Economic Union (EEU) starting in July and continuing for the six months thereafter. Further, starting next year, Russia says it will be handling scrap exports exclusively with an exchanged-based tender process. A bill in support of the new measures is expected to be introduced in September. The quotas will involve a series of specific coefficients to be assigned to each region in proportion to the shortage of ferrous scrap in the region. The lowest coefficient of 0.5 will be applied to Russia’s southern regions while the highest (1.5) will be set for Arkhangelsk. How this will effect scrap shipments within Europe is yet to be seen, especially for Turkey, the world’s top scrap importer. Turkey’s imports of shredded ferrous scrap, at any rate, have increased considerably in June so far with new data showing that Turkish mills bought 238,500mt of shredded scrap—comprising 15 single cargoes—since the start of June, which is more than twice the volume purchased by Turkey for the entirety of May (108,500mt). Scrap market observers speculate this increase in shredded steel imports to Turkey reflects a desire to build scrap stocks at presently favourable prices rather than in response to any growth in demand for domestic steel production.

A generally improved outlook for European grain output, including recent rain, has contributed to falling prices in recent days as supply concerns were again eased. September milling wheat futures for September were EUR 1.5/mt lower on Tuesday to EUR 181.25/mt on the Euronext market in Paris, reversing the previous day’s two-week high of EUR 183.75/mt. Monday also saw the EU issue a modest upgrade to its monthly wheat forecast for 2019 soft wheat production to 6.10 tonnes per hectare.

European spot prices for urea have seen only minor gains in the past week with Black Sea and Baltic Sea-based prices for prilled bulk urea rising only by US$ 3/mt week-on-week to hit US$ 260-262/mt FOB and US$ 262-265/mt FOB, respectively. Romania-based prices are said to have reached US$ 280/mt FOB for prilled bulk urea, but have been so far unconfirmed. Fertilizer producers remain hopeful for the urea trade this year, particularly considering that the rest of the market (including the ammonia and phosphate sectors) have been performing less than spectacularly in the year to date compared to urea. Participants at the recent IFA conference agreed that urea had the best near term prospects with price stability expected to continue for at least the next two years due to forecasts for high demand in Asia and relatively limited supply compared to other fertilizer types. A recent trade for 8,000mt of granular urea by Egypt’s AFC at US$ 290/mt FOB—at around US$ 5/mt over current Middle East-based prices—has been taken as a particularly encouraging sign for producers looking to make final Q2 sales. Some producers are already seen offering up to US$ 295/mt FOB on granular bulk urea for July loading.

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