Nitrogen
Outlook for Urea prices remains weak, although prices have rebounded slightly in Brazil
Prices remained flat across most Urea markets as players digested the massive $50/t drop last week. Sentiment around prices remains negative as further price reductions are considered. While demand remains weak, supply needs to be drastically cut back to tighten the market and lift prices.
China is viewed as the ‘best’ source for cutting back supply, however supply is already much reduced following the Chinese government intervention and most of the Chinese cuts are already factored into the market balance, and thus included in the price.
Brazil diverged from the rest with prices rising by as much as $15/t to touch on $325/t for this week. Two points to note – firstly Brazil was trading at a discount to many of the export benchmarks (Middle East fob price is only $323/t this week and freight must be added on top to get the product to Brazil) and secondly, this looks unlikely to be sustained as farm economics and growing conditions continue to look dismal for Brazil. The price move was driven by one transaction in a week of very quiet trade.
Speculation around the next Indian tender points to this probably happening in early January, thus Indian buying won’t support urea prices in the short term. The FAI (Fertilizer Association of India) fertilizer conference takes place late next week, so better information can be expected after that. It is unlikely that any major Indian developments will take place before the conference.
The Middle East price was unchanged this week, with very limited spot trading taking place. Freight from the Middle East to Durban is assessed as being $1/t higher this week and with the Rand weakening slightly again this week, our import parity costing of urea is calculated at just over R7,100/t. Availability of urea out of Durban is generally good, although there are still many fertilizer vessels waiting outside the port for a berth to open up.
Ammonium sulphate prices kept falling this week, losing 2-5% depending on grade. Market opinion suggests that amsul prices won’t improve until urea prices show some strength. Weak demand for nitrogen overall is hampering amsul sales although there is some buying interest from a couple of regions. Tenders in South East Asia have furthered pressured the price as producers have competed aggressively because of the absence of any other demand. Similarly in Europe, domestic producers have slashed their prices to discourage imports of Chinese amsul but sales have been poor even with much lower prices. Euorpean amsul producers are in a difficult position because high gas prices in Europe mean their ammonia costs remain high and amsul sales are seen as a way of recovering some of the ammonia cost – discounting amsul much more and they will be selling at a loss.
Poor weather in Europe severely disrupting winter crop planting remains the big issue in Ammonium nitrate sales. Ongoing poor weather is now threatening widespread winter crop planting altogether, whereas previously the concern was more than AN demand would be lower but winter plantings would still go ahead. Ammonium nitrate continues to trade at double the value of urea on a nitrogen basis, which is a huge premium for farmers to accept, especially when grain economics are under severe pressure.
Ammonia prices have started to ease down, with Asia leading the way. The Middle east benchmark price dropped $30/t to fall just below the $500/t fob level, and the Far East ammonia price shed $10/t. European prices are starting to fall as local production costs decline slightly (due to lower gas prices). Rather unexpectedly, the Tampa contract price, which is settled every 2 weeks, was unchanged and looks high at $625/t CFR. Omnia has an ammonia cargo en route to Richards Bay that should arrive in the next week or so – how quickly that product can be moved inland via rail remains a major issue, with TFR continuing to perform incredibly poorly.
Phosphates
The arm wrestle between Indian buyers and DAP sellers continues, as the Indians remain firm on their price ideas
The DAP price held at $600/t again this week as the stand-off between Indian importers and phosphates producers intensifies. The Indians are holding firm on their ideas of $500/t CFR India as this is the breakeven value for them once subsidies have been factored in. DAP producers have been able to find alternative customers who have been prepared to pay around the $600/t level. The absence of China from the market is helping sellers because it is balancing supply and demand. The Chinese look likely to remain absent until at least April 2024 when their domestic demand should quieten down.
The hard stance of the Indians is resulting in a few cargoes originally destined for India being rerouted to South East Asia and even Australia where some gaps have opened as a result of the Chinese withdrawal from the market. Phosphates from the Baltic have even been sold there, which makes for a very long voyage.
The US autumn/winter fill programme has progressed well with most distributors having sold their stock and prices remain stable. Demand seems to have been satisfied thus it appears unlikely that there will be much fresh importing from the Americans until much closer to spring application time.
Sales of Russian phosphates into Brazil this week have helped balance the market there and have resulted in MAP prices remaining unchanged. The Saudi MAP price was unchanged as Ma’aden has been focusing heavily on DAP production with strong sales into the Asian and Oceania regions.
Potash
The outlook for potash remains quite negative, although prices in most major regions remained flat this week
After last week’s widespread price decline, potash prices have mostly been stable this week. Market sentiment is negative and most players are expecting prices to fall more.
The outlook for Brazilian soya worsened further this week, with estimated production lowered to 148 million tons versus 165 million tons last season. With El Nino severely impacting growing conditions, potash demand is declining day by day. Potash inventory in Brazil remains high, suggesting that demand for new imports may be slowing down.
Some early speculation around the Indian annual potash price for 2024 has begun. This year the price was not settled until close to mid-year, which hurt sales and created uncertainty in that market. With the outlook for prices being so pessimistic, it might make sense for the Indians to push early and try to lock in a low price while producers are hungry for business. With the 2023 contract price of $320/t cfr, there isn’t a whole lot of room to go much lower for most potash producers. In the mean time Russian major Uralkali has concluded a sale to India for 150,000t to be delivered at the 2023 price by the end of the year.
The South African potash price was trimmed down by $10/t on the high end of the range, meaning the average price fell by $5/t to the low $380s/t CFR Durban.
General Market Outlook
OPEC+ cuts crude oil production but not enough to move the price much yet
Brent Crude oil prices rose to $83/bbl mid-week as the OPEC+ cartel announced it would be further cutting back supply in a bid to support oil prices. The market turned back down as the cuts were considered to be ‘underwhelming’ and oil prices have retreated to the $80/bbl mark. The European TTF Gas prices dropped further to just below $14/MMBtu. US natural gas prices retracted quite substantially to $2.8MMBtu this week.
Local maize values are sharply up this week as white and yellow maize achieve their highest prices in 6 months. Yellow maize rose above R4,000/t and white maize is approaching R4,500/t. If this trend continues, then some additional top-dressing demand for nitrogen fertilizers may transpire.
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