METHODOLOGY AND SPECIFICATIONS GUIDE

ARGUS NITROGEN
DAILY

Contents:
Methodology overview 2
Publication frequency 5
General methodology 5
Assessing price ranges 5
Spot and formula pricing 5
Terms6
Units6
Lot and cargo sizes 6
Products and specifications 6
Markets assessed 6

LAST UPDATED: MAY 2024

The most up-to-date Argus Nitrogen Daily methodology is available on www.argusmedia.com

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 METHODOLOGY AND SPECIFICATIONS GUIDE May 2024

Methodology overview • Bids and offers

• Other market information, to include spread values between
Methodology rationale grades, locations, timings, and many other data.
Argus strives to construct methodologies that reflect the way the
market trades. Argus aims to produce price assessments which are In many markets, the relevant methodology will assign a relatively
reliable and representative indicators of commodity market values higher importance to transactions over bids and offers, and a
and are free from distortion. As a result, the specific currencies, relatively higher importance to bids and offers over other market
volume units, locations and other particulars of an assessment are information. Certain markets however will exist for which such a
determined by industry conventions. hierarchy would produce unreliable and non-representative price as-
sessments, and so the methodology must assign a different relative
In the Nitrogen fertilizer markets, Argus publishes prices as laid out importance in order to ensure the quality and integrity of the price
in the specifications and methodology guide. Argus uses the trading assessment. And even in markets for which the hierarchy normally
period deemed by Argus to be most appropriate, in consultation applies, certain market situations will at times emerge for which the
with industry, to capture market liquidity. strict hierarchy would produce non-representative prices, requiring
Argus to adapt in order to publish representative prices.
In order to be included in the assessment process, deals must meet
the minimum volume, delivery, timing and specification require- Verification of transaction data
ments in our methodology. In illiquid markets, and in other cases Reporters carefully analyse all data submitted to the price assess-
where deemed appropriate, Argus assesses the range within which ment process. These data include transactions, bids, offers, vol-
product could have traded by applying a strict process outlined later umes, counterparties, specifications and any other information that
in this methodology. contributes materially to the determination of price. This high level
of care described applies regardless of the methodology employed.
Survey process Specific to transactions, bids, and offers, reporters seek to verify the
Argus price assessments are informed by information received from price, the volume, the specifications, location basis, and counter-
a wide cross section of market participants, including producers, con- party. In some transactional average methodologies, reporters also
sumers and intermediaries. Argus reporters engage with the industry examine the full array of transactions to match counterparties and
by proactively polling participants for market data. Argus will contact arrive at a list of unique transactions. In some transactional average
and accept market data from all credible market sources including methodologies, full details of the transactions verified are published
front and back office of market participants and brokers. Argus will also electronically and are accessible by subscribers.
receive market data from electronic trading platforms and directly from
the back offices of market participants. Argus will accept market data Several tests are applied by reporters in all markets to transactional
by telephone, instant messenger, email or other means. data to determine if it should be subjected to further scrutiny. If a
transaction has been identified as failing such a test, it will receive
Argus encourages all sources of market data to submit all market further scrutiny. For assessments used to settle derivatives and for
data to which they are a party that falls within the Argus stated many other assessments, Argus has established internal proce-
methodological criteria for the relevant assessment. Argus encour- dures that involve escalation of inquiry within the source’s company
ages all sources of market data to submit transaction data from and escalating review within Argus management. Should this pro-
back office functions. cess determine that a transaction should be excluded from the price
assessment process, the supervising editor will initiate approval
Throughout all markets, Argus is constantly seeking to increase and, if necessary, documentation procedures.
the number of companies willing to provide market data. Report-
ers are mentored and held accountable for expanding their pool Primary tests applied by reporters
of contacts. The number of entities providing market data can vary • Transactions not transacted at arm’s length, including deals
significantly from day to day based on market conditions. between related parties or affiliates.
• Transaction prices that deviate significantly from the mean of
For certain price assessments identified by local management, if all transactions submitted for that day.
more than 50pc of the market data involved in arriving at a price as- • Transaction prices that fall outside of the generally observed
sessment is sourced from a single party the supervising editor will lows and highs that operated throughout the trading day.
engage in an analysis of the market data with the primary reporter • Transactions that are suspected to be a leg of another trans-
to ensure that the quality and integrity of the assessment has not action or in some way contingent on an unknown transaction.
been affected. • Single deal volumes that significantly exceed the typical trans-
action volume for that market.
Market data usage • Transaction details that are identified by other market par-
In each market, Argus uses the methodological approach deemed ticipants as being for any reason potentially anomalous and
to be the most reliable and representative for that market. Argus will perceived by Argus to be as such.
utilise various types of market data in its methodologies, to include: • Transaction details that are reported by one counterparty dif-
• Transactions ferently than the other counterparty.

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•A  ny transaction details that appear to the reporter to be illogi- significantly narrows the band within which a commodity can be as-
cal or to stray from the norms of trading behaviour. This could sessed, and greatly increases the accuracy and consistency of the
include but is not limited to divergent specifications, unusual price series. The application of judgment is conducted jointly with
delivery location and counterparties not typically seen. the supervising editor, in order to be sure that the guidelines below
• Transactions that involve the same counterparties, the same are being followed. Valuation metrics include the following:
price and delivery dates are checked to see that they are
separate deals and not one deal duplicated in Argus records. Relative value transactions
Frequently transactions occur which instead of being an outright
Secondary tests applied by editors for transactions purchase or sale of a single commodity, are instead exchanges of
identified for further scrutiny commodities. Such transactions allow reporters to value less liquid
markets against more liquid ones and establish a strong basis for
Transaction tests the exercise of judgment.
• The impact of linkage of the deal to possible other transac-
tions such as contingent legs, exchanges, options, swaps, •E  xchange one commodity for a different commodity in the
or other derivative instruments. This will include a review of same market at a negotiated value.
transactions in markets that the reporter may not be covering. • Exchange delivery dates for the same commodity at a negoti-
• The nature of disagreement between counterparties on trans- ated value.
actional details. • Exchange a commodity in one location for the same com-
• The possibility that a deal is directly linked to an offsetting modity at another location at a negotiated value.
transaction that is not publicly known, for example a “wash
trade” which has the purpose of influencing the published Bids and offers
price. If a sufficient number of bids and offers populate the market, then in
• The impact of non-market factors on price or volume, includ- most cases the highest bid and the lowest offer can be assumed to
ing distressed delivery, credit issues, scheduling issues, define the boundaries between which a deal could be transacted.
demurrage, or containment.
Comparative metrics
Source tests •T  he relative values between compared commodities are read-
• The credibility of the explanation provided for the outlying ily discussed in the market and can be discovered through
nature of the transaction. dialogue with market participants. These discussions are the
• The track record of the source. Sources will be deemed more precursor to negotiation and conclusion of transactions.
credible if they • Comparison to the same commodity in another market centre.
• Regularly provide transaction data with few errors. • Comparison to a more actively traded but slightly different
• Provide data by Argus’ established deadline. specification commodity in the same market centre.
• Quickly respond to queries from Argus reporters. • Comparison to the same commodity traded for a different
• Have staff designated to respond to such queries. delivery timing.
• How close the information receipt is to the deadline for • Comparison to the commodity’s primary feedstock or primary
information, and the impact of that proximity on the validation derived product(s).
process. • Comparison to trade in the same commodity but in a different
modality (as in barge versus oceangoing vessel) or in a dif-
Assessment guidelines ferent total volume (as in full cargo load versus partial cargo
When insufficient, inadequate, or no transaction information exists, load).
or when Argus concludes that a transaction-based methodology will
not produce representative prices, Argus reporters will make an as- Volume minimums and transaction data thresholds
sessment of market value by applying intelligent judgment based on Argus typically does not establish thresholds strictly on the basis
a broad array of factual market information. Reporters must use a of a count of transactions, as this could lead to unreliable and non-
high degree of care in gathering and validating all market data used representative assessments and because of the varying transporta-
in determining price assessments, a degree of care equal to that tion infrastructure found in all commodity markets. Instead, mini-
applying to gathering and validating transactions. The information mum volumes are typically established which may apply to each
used to form an assessment could include deals done, bids, offers, transaction accepted, to the aggregate of transactions, to transac-
tenders, spread trades, exchange trades, fundamental supply and tions which set a low or high assessment or to other volumetrically
demand information and other inputs. relevant parameters.

The assessment process employing judgment is rigorous, replica- For price assessments used to settle derivatives, Argus will seek to
ble, and uses widely accepted valuation metrics. These valuation establish minimum transaction data thresholds, and when no such
metrics mirror the process used by physical commodity traders threshold can be established Argus will explain the reasons. These
to internally assess value prior to entering the market with a bid or thresholds will often reflect the minimum volumes necessary to
offer. Applying these valuation metrics along with sound judgment produce a transaction-based methodology, but may also establish

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minimum deal parameters for use by a methodology that is based also has strict policies regarding central archiving of email and
primarily on judgment. instant messenger communication, maintenance and archiving of
notes, and archiving of spreadsheets and deal lists used in the price
Should no transaction threshold exist, or should submitted data fall assessment process. Argus publishes prices that report and reflect
below this methodology’s stated transaction data threshold for any prevailing levels for open-market arms length transactions (please
reason, Argus will follow the procedures outlined elsewhere in this see the Argus Global Compliance Policy for a detailed definition of
document regarding the exercise of judgment in the price assess- arms length).
ment process.
Consistency in the assessment process
Transparency Argus recognises the need to have judgment consistently applied
Argus values transparency in energy markets. As a result, where by reporters covering separate markets, and by reporters replacing
available, we publish lists of deals in our reports that include price, existing reporters in the assessment process. In order to ensure
basis, counterparty and volume information. The deal tables allow this consistency, Argus has developed a programme of training and
subscribers to cross check and verify the deals against the prices. oversight of reporters. This programme includes:
Argus feels transparency and openness is vital to developing confi-
dence in the price assessment process. •A  global price reporting manual describing among other
things the guidelines for the exercise of judgment
Swaps and forwards markets • Cross-training of staff between markets to ensure proper holi-
Argus publishes forward assessments for numerous markets. day and sick leave backup. Editors that float between markets
These include forward market contracts that can allow physical to monitor staff application of best practices
delivery and swaps contracts that swap a fixed price for the aver- • Experienced editors overseeing reporting teams are involved
age of a floating published price. Argus looks at forward swaps to in daily mentoring and assisting in the application of judgment
inform physical assessments but places primary emphasis on the for illiquid markets
physical markets. • Editors are required to sign-off on all price assessments each
day, thus ensuring the consistent application of judgment.
Publications and price data
Argus Nitrogen fertilizers prices are published in the Argus Nitrogen Review of methodology
Daily report. Subsets of these prices appear in other Argus market The overriding objective of any methodology is to produce price as-
reports and newsletters in various forms. The price data are available sessments which are reliable and representative indicators of com-
independent of the text-based report in electronic files that can feed modity market values and are free from distortion. As a result, Argus
into various databases. These price data are also supplied through editors and reporters are regularly examining our methodologies
various third-party data integrators. The Argus website also provides and are in regular dialogue with the industry in order to ensure that
access to prices, reports and news with various web-based tools. the methodologies are representative of the market being assessed.
All Argus prices are kept in a historical database and available for This process is integral with reporting on a given market. In addition
purchase. Contact your local Argus office for information. to this ongoing review of methodology, Argus conducts reviews of
all of its methodologies and methodology documents on at least an
A publication schedule is available at www.argusmedia.com annual basis.

Corrections to assessments Argus market report editors and management will periodically and
Argus will on occasion publish corrections to price assessments as merited initiate reviews of market coverage based on a qualita-
after the publication date. We will correct errors that arise from cleri- tive analysis that includes measurements of liquidity, visibility of
cal mistakes, calculation errors, or a misapplication of our stated market data, consistency of market data, quality of market data and
methodology. Argus will not retroactively assess markets based on industry usage of the assessments. Report editors will review:
new information learned after the assessments are published. We
make our best effort to assess markets based on the information we • Appropriateness of the methodology of existing assessments
gather during the trading day assessed. • Termination of existing assessments
• Initiation of new assessments.
Ethics and compliance
Argus operates according to the best practices in the publishing The report editor will initiate an informal process to examine viability.
field, and maintains thorough compliance procedures throughout This process includes:
the firm. We want to be seen as a preferred provider by our sub-
scribers, who are held to equally high standards, while at the same • Informal discussions with market participants
time maintaining our editorial integrity and independence. Argus • Informal discussions with other stakeholders
has a strict ethics policy that applies to all staff. The policy can be • Internal review of market data
found on our website at www.argusmedia.com. Included in this
policy are restrictions against staff trading in any energy commodity Should changes, terminations, or initiations be merited, the report
or energy related stocks, and guidelines for accepting gifts. Argus editor will submit an internal proposal to management for review

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and approval. Should changes or terminations of existing assess- General methodology

ments be approved, then formal procedures for external consulta-
tion are begun. Argus surveys a wide variety of market participants during the
course of the day including producers, trader, buyers, sellers and
Changes to methodology other market analysts. This survey seeks to confirm what trade has
Formal proposals to change methodologies typically emerge out of been done, by whom, as well as firm bids and offers. The goal is to
the ongoing process of internal and external review of the meth- cross check market transactions from all participants wherever pos-
odologies. Formal procedures for external consultation regarding sible. The survey also seeks to ascertain fundamentals data, tender
material changes to existing methodologies will be initiated with an news and supply and demand information. Argus will contact and
announcement of the proposed change published in the relevant accept market data from all credible market sources including front
Argus report. This announcement will include: and back office of market participants and brokers.

•D  etails on the proposed change and the rationale

• Method for submitting comments with a deadline for submis- Assessing price ranges
sions
• For prices used in derivatives, notice that all formal comments Nitrogen prices are assessed in various regions, countries and
will be published after the given consultation period unless within countries on a free on board (fob) basis in the main export
submitter requests confidentiality. regions and on a cost and freight (cfr) basis in the main destination
markets. Deals, bids and offers must be considered repeatable to
Argus will provide sufficient opportunity for stakeholders to analyse be reflected in the assessments.
and comment on changes, but will not allow the time needed to
follow these procedures to create a situation wherein unrepresenta- The report seeks to determine price ranges in which actual transac-
tive or false prices are published, markets are disrupted, or market tions are taking place or in which transactions could have taken
participants are put at unnecessary risk. Argus will engage with place between a willing buyer and seller.
industry throughout this process in order to gain acceptance of pro-
posed changes to methodology. Argus cannot however guarantee When there is sufficient liquidity and deals data are deemed reliable
universal acceptance and will act for the good order of the market and representative, the price range will be defined on the low and the
and ensure the continued integrity of its price assessments as an high end of confirmed deals concluded throughout the trading day.
overriding objective. These deals must meet the minimum volumes and strict delivery tim-
ing, as well as specifications as laid down in this methodology.
Following the consultation period, Argus management will com-
mence an internal review and decide on the methodology change. Information on transactions, bids and offers that lie outside the
This will be followed by an announcement of the decision, which specifications of timing, size, location and quality may be used in
will be published in the relevant Argus report and include a date for assessing price ranges, but deals that lie within these specifications
implementation. For prices used in derivatives, publication of stake- are given most weight.
holders’ formal comments that are not subject to confidentiality and
Argus’ response to those comments will also take place. In markets that periodically lack liquidity, Argus may assess price
ranges based on a range of other market information including
netbacks to more liquid markets and market fundamentals.
Publication frequency
Prices assessments are of the market price during the trading peri-
Argus publishes the Argus Nitrogen Daily report each day, except ods on the day of publication as defined below.
for certain national holidays.

•N  o report – Argus Nitrogen Daily is not published on days that Spot and formula pricing
are holidays in both the UK and US, and between 25 Decem-
ber and 1 January Spot pricing refers to specific cargoes sold that are scheduled to
• China fob – not published on holidays in China load within 40 days of the sale being agreed. These prices are cash
• Egypt fob (Europe) – not published on holidays in Egypt or prices, i.e. net of any credit.
the UK
• Brazil cfr – not published on holidays in Brazil or the UK Formula pricing is an arrangement where a buyer and seller agree
• Nola barge fob – not published on holidays in the US in advance that the price to be paid for a product delivered in the
future will be based on a pre-determined calculation, sometimes uti-
A full publication schedule is available at www.argusmedia.com. lising published prices from Argus and/or other publications. Given
that the exact nature of the calculation or the agreement between
the parties is often private and confidential, and if the deal is con-
sidered a one-off (i.e not repeatable) then calculated netbacks are

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 METHODOLOGY AND SPECIFICATIONS GUIDE May 2024

not used in formulation of a spot price range. However, if a buyer also used in a variety of industrial processes. Prices are only as-
and seller use this method of pricing for multiple transactions on a sessed based on deals concluded in the agricultural sector. Sales
specific trade route, then the editor may use the deal in formulating to the industrial sector may be discussed in the text, but will not
a spot price range using current known cfr levels, domestic prices in form part of the assessment.
the destination country and indicative freight rates.

Markets assessed
Terms
Prilled urea
Some transactions are conducted on a sight/cash basis, but where
credit terms apply, e.g. up to 180 days, these are taken into account China fob
and subtracted from the price so that the published price is net of This price covers prilled urea shipped from a range of ports in
credit or other terms. China. Prices are determined through conversations with Chinese
suppliers, trading companies that buy urea from myriad producers
and distributors in the country. The main markets for Chinese urea
Units are India and Asia-Pacific.

Most prices are assessed in US $/t, apart from US domestic refer- The price is assessed 9am-5pm Singapore time.
ences, which are priced in short tons (st).
Granular urea

Lot and cargo sizes Egypt fob (Europe)

This price is based on the sales of the exporting producers in Egypt
For international trade, the minimum lot size used for consideration to European markets and Turkey. Prices are determined by conver-
and inclusion in the relevant price range is 5,000t of a particular sations with the producers in Egypt and trading companies who buy
product (this includes part cargoes on larger vessels including other the urea from them.
fertilizers and for which the freight rate may be more favourable –
although this will be explained in the text). The exception is prices The price is assessed 9am-4.30pm London time.
quoted in the US domestic market for which the price is indicative of
one barge, assumed to be carrying a minimum of 1,500st, with no Brazil cfr
set maximum number of barges. There may be occasions when a This price is assessed for all Brazilian ports. It is determined through
barge is loaded with less quantity for reasons of low draught levels, conversations with producers, trading companies and end-buyers.
but this will be explained fully in the text. Brazil is a major outlet for granular urea from the Middle East, Nige-
ria and north Africa.
For the Argus Nitrogen Daily report, Argus considers cargoes as
follows — typical short sea routes in Europe — for example from The price is assessed 9am-4.30pm London time.
Egypt — employ vessels of 5,000-6,000t. Deepsea voyages employ
handysize vessels and above: Nola barge fob
This assessment includes prices for trades of barges loaded at
•H andysize 10,000-35,000t (the majority of deepsea nitrogen Nola or to load in Nola prompt to 40 days forward from when the
trade) sale has taken place. If a particular origin of product is treated by
• Handymax (35,000-49,000t) the market differently because of specification or quality concerns,
• Panamax (50,000-70,000t) trades of this urea may be excluded from any assessed ranges. For
instance, if product from a non-traditional source is trading at a $10/
In the US domestic nitrogen market, a typical barge at New Orleans st discount to other product, it would be excluded. Alternatively, if
(Nola) is 1,500st. a speciality buyer requirement prompts a premium price outside of
the range of other trades collected during the assessment period,
such a trade may also be excluded.
Products and specifications
The price is assessed 7am-4pm Houston time.
Urea
Urea is a dry bulk fertilizer containing 46pc nitrogen by weight. It Nola barge fob month-to-date VWA
is produced by combining ammonia with carbon dioxide, which A month-to-date volume-weighted average index of trades for
is generated during the production of ammonia. It is produced in barges released to the buyer within 30 days of the date of trade.
two forms — prilled and granular. Both of these are widely used Trades for barges supplied over a defined period of time may be
for direct application to land. Granular urea is also often used as considered for inclusion in the assessment if at least half of the
a feedstock for bulk blending for NPK manufacture. Prilled urea is period falls within the 30 days of the date of trade.

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To be considered for inclusion in the index, trades must be complet-

ed and confirmed by 4pm Houston time on the day of trade. Trades
completed after 4pm may be included in the follow day’s calculation
of the index.

The index is the volume-weighted average of all confirmed trades

reported each day during the calendar month. The index published
in the last Argus Nitrogen Daily of the calendar month is the month’s
final index.

In the event that no trades are report at the start of the calendar
month, Argus will publish the midpoint of the daily Nola barge fob
assessment as a placeholder until index-relevant trade has been
reported, at which point the index will be the volume-weighted aver-
age of those trades.

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