Nitrogen
Indian tender locks in big volumes that sees the Urea price moving downwards
Despite a fair amount of seller resistance, the Indian urea tender was able to lock in around 1.6 million tons at a delivered price of $400/t. This meant that the Middle East urea price dropped into the mid-$380s, a reduction of more than $10/t. Participants in the tender were faced with the dilemma of accepting what appeared to be a low price or take their chances finding buyers elsewhere in the world. Most of them elected to take the Indian price and secure the sales volumes. Overall, more than 4 million tons were originally offered in the tender.
Chinese exports are drying up as the government is holding up export permits, which should be tightening the market. However those sellers that opted out of Indian sales in the hope of finding other regional markets were disappointed as the other big markets such as Brazil and Europe were silent.
Producers should be comfortable after the large volume going to India but the absence of demand from other regions will be in their minds. The US market is very soft at present, offering netbacks to the Middle East of around $350/t, which won’t attract much interest.
The $400/t price for urea seems to be a ceiling – producers are targeting sales at this level to South America and Europe but buyers are very reluctant to pay more than $390-395/t. Overall nitrogen demand is weaker than usual for this time of year, thus producers have reason for some optimism but the longer they wait for the big surge in seasonal demand, the more difficult it is to achieve higher prices.
Ammonium sulphate prices followed urea’s lead, with a reduction of $8/t as Chinese exporters sit on big positions and are starting to chase sales. Brazilian buyers are delaying purchases as they hope to achieve lower prices, plus they are comfortable with 750,000t of amsul already booked for October.
Ammonium nitrate prices slipped downwards this week as demand remains poor, especially for prompt cargoes. Brazil is showing stronger interest in AN for Q1 shipment, which would be used for tobacco application. CAN demand in Europe is improving as the winter stocking programme gains momentum. Prices of CAN have not shifted much – no doubt producers are wary of falling urea prices and wish to avoid pushing their customers towards urea.
The Ammonia market saw some divergence between the two hemisphere markets. The Ma’aden ammonia plant returning to production has eased supply in the Eastern Hemisphere and prices dropped $15/t to $535/t. In the Americas ammonia moved sharply up at the Tampa contract price rose $50/t to $625/t CFR. American demand for ammonia is supporting prices in the west.
Phosphates
The revised Indian Subsidy is announced but phosphates prices are unmoved so far
The long-awaited revision to the Indian Nutrient Based Subsidy for phosphates was published this week, with the subsidy for DAP reduced by 31%. The adjustment was anticipated but the amount thereof was unclear. The lower DAP subsidy means that Indian importers cannot afford to pay more than $495/t CFR to break even. The Indian DAP price is currently around $595/t CFR, so Indian buying has come to a complete halt. Given the huge importance of India as a buyer, it is almost certain that this will force phosphate prices down towards the $500/t level.
The overall supply-demand balance remains key as China has implemented a quota on its phosphate exports for Q4. Demand however remains weak in most regions and the absence of India until the price is viable means that there is growing downwards pressure on the price, especially for DAP.
The MAP supply-demand balance remains a bit tighter, mostly due to limited availability. The MAP price remaining a good $50/t lower than DAP is certainly contributing to the lack of supply with producers incentivized to focus on DAP, which also has a wider geographical market. MAP prices are likely to converge with DAP prices during the next few months, and prices of phosphates are expected to fall towards the $500/t level.
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Potash
Potash prices stable once again as the regular refrain of poor demand continues
Potash prices remained flat across all regions this week as little trade was reported. There is plenty of talk about price direction amidst weak demand and this talk is all pointing towards lower prices.
There are unconfirmed reports of potash sales in Brazil at below the current $340/t price. Many Brazilian buyers are indicating that they are looking for even lower numbers before they will commit.
The Indian subsidy on potash was slashed by 85% this week but is expected to have little impact on prices at the current Indian import contract price of $319/t CFR as this price still allows 15% margin for importers.
The South African CFR price for potash shifted down by $5/t this week, after 3 months of unchanged prices. Potash stocks are currently adequate with additional cargoes expected for November and December – importers are trying to attract buyer commitment on these volumes to avoid carry-over stock when the season ends.
General Market Outlook
International Crop prices tumble as favourable weather conditions in North And South America boost yield estimates
Brent crude oil prices retreated from $92/bbl through the week to fall below $90/bbl. Increasing concerns about the widening of the Israel-Gaza conflict to involve the USA and Iran is raising the probability of oil prices moving back up. The TTF price gas price in Europe remains elevated around $16/MMBtu as Europe is extremely vulnerable to gas disruptions from Russia. US natural gas prices caught up with general energy trends this week rising 10% to $3.3/MMBtu.
Favourable rains in the US Southern corn-belt and also in South America improved the outlook for maize, soya and wheat crops. This put CME futures prices under real pressure with the international maize price dropping more than 5% this week and soya and wheat losing around 2.5%. The Rand was at least steady at just below R19 to the Dollar.
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