Nitrogen
Urea prices keep heading down as demand for Nitrogen in the key end-markets carries on declining
Urea prices took a step down in most locations this week, with the reduction being driven by the end-use markets in North and South America. The outlook for late season demand in Brazil and the Safrinha season that starts at the end of their summer is deteriorating by day – rainfall is below average as El Nino impacts. Brazil also has plenty of urea cargoes purchased and en route, thus there are very few new buyers and any price discussions involve hefty discounts. The Brazilian price fell by almost $20/t this week and now sits close to the $350/t CFR mark.
Rather oddly, the Middle East price ignored developments in the Americas and actually rose by a few dollars on the high end of the spread. The Middle East price is $370/t FOB, with a lot of producers focusing on their deliveries to India under the most recent tender. What will be concerning the Middle East producers is the scrapping of the Pakistan tender and Bangladesh’s financial woes limiting their buying – these two markets would normally be buying close to 1 million tons at this time of year. It appears inevitable that the Middle East price will see some substantial reductions in the coming weeks to remain competitive.
The Chinese situation with the government throttling urea exports is tightening the market and domestic demand in China seems strong, which means that the export restrictions may stay in place for a few more months. But at this stage the removal of Chinese product from the global market is not enough to stop the international price slide.
Several producers tested the European market this week as imports are way behind normal for what should be peak buying season now. Even with a discount of €25/t there were no takers. EU demand for urea is so weak that Yara has opted to idle its urea plant in Italy for at least 2 months.
The forward market for urea is very pessimistic right now, with futures quotes down to $330/t for Arab Gulf product for December. This is $40/t below current levels and seems unlikely given that December and January are peak demand months, even if demand is lower than expected. The wider message in the market is clear – urea is expected to fall further in the short term.
Ammonium sulphate had another week of large price cuts with $10/t being taken off the upper end of the price range. Falling urea prices in Brazil are being blamed for amsul price drops, with Brazilian buyers driving the price down hard. There are suggestions that current amsul prices could attract some European buying but how volume would be bought is the question. Amsul prices look to set to be weak until urea finds a floor.
Flooding in the north-western countries of the EU is severely impacting the planting of winter crops and thus hurting the expected Ammonium nitrate demand for spring application. Domestic demand for AN in Eastern Europe is absorbing a lot of the Russian production for now, minimizing the impact of minimal Brazilian interest in AN. CAN demand is also very weak with combination of poor weather conditions and unattractive crop economics limiting interest.
The Ammonia market is beginning to reflect similar views to that of urea – a mood of pessimism and falling prices is at the front of market gossip. Ammonia production at a number of sites has improved in recent weeks and thus supply is much healthier. On the other hand demand is slowing down, especially in the Asian markets. While ammonia prices are still at $550-600/t across most benchmarks, a downward adjustment is imminent.
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Phosphates
Phosphate prices unchanged as falling demand counter-balances tightening supply
The recent announcement by Chinese of a restriction in phosphate exports is being watched closely by players. While it is certain this this will reduce supply of phosphates into the international market, it is unclear how much of an impact it will have on prices. On the other side of the equation, we have the Indian subsidy issue where the DAP price needs to be a good $100/t lower for Indian imports to be feasible. A sustained absence of Indian DAP buying would have a large impact on demand and counteract the reduction in Chinese supply. The DAP price remained unchanged this week at just below $600/t in most regions.
MAP prices continue to edge upwards due to the relatively shortage of product and reasonable demand. Brazilian prices rose another $5/t to $565/t CFR at the upper end of the price range. Morocco has enjoyed a surge in phosphate sales to Europe in recent weeks and the price of MAP has risen strongly, now bring Moroccan MAP and DAP prices in line around the $600/t level. MAP in Saudi Arabia remains much lower than this despite a small rise in the price this week – availability of MAP from Saudi remains an issue; if product can be found, the price is around $520/t FOB Saudi, or around $545/f CFR Durban. With the shortage of MAP in South Africa, local prices are well above this level as sellers can name their price as local demand is strong.
Apologies for the typo that crept into the price table in the emailed report last week – the value of a kg of phosphate should have been R39.35, not R38.35 as published. Recipients of the PDF version received the correct information.
Potash
The Brazil Potash index falls as lack of buying interest pushes the price down
The potash price seems to be slowly yielding to downward pressure as weak demand continues to plague most regional markets. The Brazilian price dropped by $5/t to fall into the mid $330s/t but there are unconfirmed reports that deals may have been done at $330/t or even lower. Another good month for imports into Brazil has them on track for record potash consumption this year, yet consumption of potash is lower than suppliers had hoped for. As mentioned earlier, the increasingly negative crop outlook for Brazil is impacting all fertilizer demand and Safrinha requirements for potash are likely to be negligible in Q1 next year. A Bloomberg reported, maize is at a 3 year low price. Soya planting has been delayed by unseasonal dry weather in Brazil, which further delays potash application.
The South African potash price was adjusted $5/t lower this week as reasonable local stock levels and moderate demand push importers to chase sales. The price is now just below $390/t CFR which equates to just under R7,700/t ex-warehouse at this week’s exchange rate after all the port costs are factored in.
General Market Outlook
Crude oil price forecast revised downwards and Rands strengthens moderately
The Brent Crude oil prices continued its slide through the $80/threshold and fell as low as $77.5/bbl earlier this week before settling at $78.8/bbl. Citigroup came out with a forecast that Brent crude will fall to $73/bbl by Q2 next year and the end 2024 at $68/bbl. This is a very different outlook to Goldman Sachs earlier this year, where they predicted prices of $100+. Much higher supply of oil is behind the lowering prices. The European TTF Gas prices remis holding firm at $15/MMBtu, while American natural gas prices have fallen slightly to $3.0/MMBtu.
The Rand improved by 1.5% against the Dollar and is trading in the low to mid R18s this week. S&P is due to review South Africa’s sovereign credit rating today (Friday). It is likely to remain at ‘stable’ but it is possible that the ratings could be upgraded to ‘positive’ which would like strengthen the Rand.
On the grain front, Brazilian soya planting issues were the hot topic this week. Lack of rainfall and very high temperatures have caused soya plantings to fall way behind norms and as much as 20% of the soya crop will have to be replanted in Brazil’s biggest planting province, Mato Grosso, which plants 27% of Brazil’s soya. Mato Grosso alone plants over 12 million hectares of soya – almost the same area as South Africa’s total arable land.
The poor planting conditions are having a few impacts – firstly the Brazilian soya production forecast is being trimmed down, supporting prices. Secondly, the soya harvest is likely to be delayed by up to a month, which means grain traders need to factor in alternative sources during that period. Thirdly the Safrinha maize crop that is planted in late summer to utilize the residual nutrients and nitrogen fixed in the soil by the soya will also be delayed and there are suggestions that large areas of Safrinha maize will simply not be planted. This will lead to a reduction in Brazil’s maize harvest too – as yet it’s not improving the maize price but it may prove to be a positive factor on the international maize price. The timing is good for our local growers because the impact of a poor Safrinha will be known during Q2 next year as our maize crop is being harvested.
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