Nitrogen
Urea prices remain under pressure as demand in the major importing regions is below normal
This week saw small adjustments on various Urea benchmark prices. The main theme was the absence of demand in the major Northern Hemisphere regions, where demand would traditionally be strong at this time of year as supply chains gear up to be ready for the Northern Hemisphere spring. Europe showed a bit of buying interest but trades were in small lots and didn’t make a dent against the huge oversupply of product that continues to be prevalent.
As further info emerged on India’s situation, expectations of substantial Indian buying were crushed as India has high stock levels and is not expected to tender until January at best. At this stage, any Indian tender would be for small volumes – thus hopes of Indian demand supporting higher urea prices are minimal.
A similar story in Brazil where demand remains weak and traders with big stock positions in-country are being forced to discount prices to keep some product moving. The Brazilian price declined by $5/t this week – mostly pushed down by cheap Iranian sales being focused on Brazil.
The US market showed pockets of buying activity but overall spot buying was limited. Some traders are starting to roll the dice on taking positions for February arrival in the US when demand is likely to be strong as distribution will be in full flow ahead of spring plantings. But with Christmas just around the corner, Europe and the Americas will not be active buyers.
The Middle East firmed marginally this week as the price spread narrowed and the average price is sitting just below $320/t. With the holiday season kicking in in the West, the Asian producers will be relying on Asian demand, of which there is little sign right now. The ongoing absence of the Chinese from the urea export market helps but all the other export producers are sitting with large stocks and all of them are hungry for new business.
Ammonium sulphate prices slide down by a few dollars again this week – an oversupply of product and weak Nitrogen values across all products is pushing prices down. On the other hand prices in Brazil seemed to be supported by the move in Brazilian urea prices and saw a rise. Amsul nitrogen values are now roughly equal to urea nitrogen values, meaning that the sulphur component of the amsul is effectively free at the current price ratios. Demand for amsul is therefore expected to strengthen and support slightly higher prices.
Ammonium nitrate prices keeping falling too, as the poor weather conditions in Europe are responsible for European demand being absent. With urea prices being so low, there is substitution happening as well, which is making the AN demand picture even worse. CAN prices took another hit this week, falling by €15/t. CAN prices have dropped 20% in the last month but CAN nitrogen values remain 80% more expensive than urea.
Ammonia prices trended downwards this week as the Middle East price dropped by $30/t and availability from most of the key export locations looks good. The European gas price moved lower again this week, despite cold weather in the region that would usually push gas prices up, so European ammonia producers can produce viably for the time being and EU import demand is quiet.
Phosphates
India returns to the market this week as low domestic stocks force them to buy
India’s tactic of delaying purchasing in the hope of forcing DAP prices lower has not been successful. This week the Indians bought significant volumes of phosphates as low phosphate inventories in the country obliged importers to source product promptly. The Indian government has indicated that it will increase phosphate subsidies, which will effectively increase the breakeven price for imported DAP, which in turn has sent a signal to phosphate sellers that the Indians will be able to afford higher numbers.
While phosphate markets have been relatively tight in the past few months, this tightness has been driven by (voluntary) supply tightness as China has opted to limit phosphate exports and both the mega-producers in Saudi and Morocco have been producing and exporting at well below their nameplate capacity. This trend seems to be changing as Morocco has been selling much more actively in the past few weeks and certainly has the spare capacity to easily cover any shortages in the coming months. It’s probably to early to suggest that this will cause phosphate prices to turn downwards but it could be an early flag that up-turn seen in phosphates pricing since June this year may be coming to an end.
MAP prices in general were flat this week, with sales from Saudi being negligible and the Brazilian supply-demand balance being comfortable for the short term. With the Rand sharply improving against the Dollar by over 2% yesterday, our import parity costing has MAP at around R10,800/t ex-Durban, which is a fair bit lower than Foskor’s latest price of R11,267/t ex-Richards Bay – but if an exchange rate of closer to R19:$ is assumed then Foskor’s price is very much in line with import parity.
Potash
A drop in Potash prices in Brazil indicates likely further reductions to come
This week brought a $10/t drop to Brazilian potash prices as they fall to $315/t CFR. With the Christmas lull fast approaching, sellers were actively chasing what little buying interest existed. Brazilian domestic potash stocks remain high, therefore only low prices are attracting buyers at this point.
South East Asia awaits some medium-sized potash tenders in the coming weeks but overall farm economics (especially for palm oil) remain weak, so there is downside risk on both purchasing volumes and the price.
Other regional markets in the West are likely to be paused for the holidays and no meaningful buying is anticipated until early January at best.
The South African CFR potash price benchmark dropped by more than $12/t this week as importers sitting on large stock positions come under pressure to match price developments in Brazil and generate sales as the local season moves towards full-time.
General Market Outlook
Crude oil price remains under pressure as recessionary fears impact commodity markets
Brent Crude oil values dropped as low as $73/bbl earlier this week. Some early, and rather optimistic, forecasts for stronger crude oil demand in 2024 have helped prices rise to almost $77/bbl but there appears to be little substance behind this rally. With the holidays slowing most markets, prices are expected to sit in the mid-$70s for the coming few weeks. Contrary to expectation, the European TTF Gas price keep heading down this week and now trades at $11/MMBtu. With cold winter weather impacting Europe and driving gas demand up, it remains to be seen how long the price remains at this level. The US natural gas prices eased lower further this week to $2.4/MMBtu.
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