Welcome to the first F Curve Insights for 2024! I trust you had a happy and healthy Christmas with family and friends! Best wishes for prosperous 2024 to you!
Nitrogen
Urea markets have been paused as India holds a urea tender, which should give a strong signal to price direction for January
The holiday period led to subdued trading in most Urea markets. The Indians took advantage of the lull to bring forward their anticipated January urea tender, no doubt with the rationale of attracting low offers as demand from the North American and European markets would be non-existent. The Indian tender closed yesterday (4 January) and 2.7 million tons of product was offered. This will be way in excess of what the Indians are seeking, as Indian domestic urea stocks are well-above seasonal norms. The offer prices are not expected to be opened until 8 January – early indications are that prices of $320/t CFR India or lower are expected.
While there has been little significant trading volume, some urea benchmark prices have adjusted to align with overall prices. In general, prices are sitting around the $320/t level, and $20-30/t lower from sanctioned origins such as Russia and Iran. The Middle East price has been unchanged at just below $320/t FOB since mid-December but if the Indian tender price predictions are correct, then the Middle East is going approach $300/t FOB.
The urea price in Brazil jumped up $15/t this week to approach $330/t CFR but this price is explained by opportunistic traders trying to use the India tender as justification that urea availability may tighten, plus higher freight rates being in the pipeline, to support a higher price. This price was met with complete disinterest from Brazilian buyers. The Brazilian Safrinha season is fast approaching but the combination of adequate urea stocks and falling crop values is making Brazilian wholesalers and distributors hold off buying for now.
Locally, port congestion in Durban is still a major issue with a lot of rain over the past 10 days continuing to delay vessel discharging and a huge backlog of vessels remains at anchor outside the port. There are a few fertilizer cargoes waiting to discharge although port stocks still look more than ample for this time of year, with demand quiet from most regions and only really the western maize areas planting as some rainfall is reported.
Ammonium sulphate have also been quiet over the past weeks as the Christmas break has slowed down interest from Europe and the Americas. Prices have mostly been unchanged, although crystalline product did see a small increase in price this week. No meaningful price movement is likely until urea prices start to move – with a downward move in urea likely after the Indian tender, amsul prices may well drop $5-10/t as well. Currently we see indicative amsul CFR values in Durban at around $160/t for crystalline and $180/t for granular product (before any importing and discharging costs).
Amsul import data in SA for the period to end-November shows that just over 280,000t had been imported, which is about 35,000t lower than the same period in the prior year. This indicates both poor (late) demand and may also reflect the port delays holding up some shipments.
Ammonium nitrate markets have been muted as is normal over the Christmas period with most traditional AN markets being shut down. AN traders are hoping that demand will emerge after the holidays but early indications have been that this is not the case. CAN prices remain unchanged due to minimal liquidity and trading in the market. A fall in urea prices will add increased pressure to AN sales.
Ammonia prices have been heading down as supply from the major export producers has been strong and demand rather weak. Just before Christmas the Tampa contract price dropped by $100/t to $525/t CFR, which in part was an overdue correction but also indicative of weak demand. This week saw the Middle East price drop by $35/t to take prices below $450/t FOB, and the Far East price fell by $40/t.
Phosphates
Phosphate markets have been muted as prices remain unchanged, Saudi producer Ma’aden makes huge sales this week
Phosphate trading activity over the past few weeks has been predictably uneventful. The Christmas holidays have been a role and the anticipated revision of the Indian phosphate subsidy has still not happened. Without a boost in the Indian subsidy, Indian buying is going to be subdued unless phosphate prices fall significantly. With Chinese phosphate exports being completely absent, a big fall in phosphates prices is unlikely in the short term.
While trading activity was limited in most regions, Saudi major Ma’aden had a busy week concluding over 300,000t in DAP sales. These sales are to a variety of countries, including Australia, India and Kenya. This covers more than 60% of Ma’aden’s nameplate production – it also reflects high inventory levels which should now decrease to more manageable levels.
OCP from Morocco has been active in selling January tons too but has only committed 30-40% of its almost 1 million tons per month of production capacity. Demand from the Americas has been very quiet, so OCP has focused on delivering to Ethiopia under its existing tender commitments, and targeting some Asian and Australian sales.
Trade data for January-November into SA shows how MAP imports surged through October and November. The year-to-date total is 219,000t versus 232,500t for the same period in 2022, only 6% behind. Over 75,000t (3 vessels) of MAP were sourced from Russia in October and November.
The phosphates sector is also watching the Indian quarterly phos acid contract price negotiations with interest – the Q1 price has not yet been settled. Expectations are that the price will be moderately lower than the Q4 $985/t CFR India level. This contract price is very significant for India because it establishes the domestic production cost level for DAP, which in turn sets the breakeven point for imported DAP prices.
Potash
The Potash market was inactive due to Holidays, outlook suggests lower prices
The holiday slowdown meant potash prices began the year where they ended off last year – the major importing markets sitting with prices around the $320/t CFR level and smaller importing regions paying $40-60/t more.
There was a little bit of activity in the US where potash was being traded ahead of spring application – indications are that around 70% of the requirement has now been delivered into the market, with the remaining 30% expected to be sourced nearer spring.
The Brazilian market was quiet for the holidays and with declining maize economics for the upcoming Safrinha season, potash demand there is likely to be extremely quiet in the coming quarter.
These factors all point to lower potash prices in the coming month or 2. How much lower prices can go below current levels is an important question because netback values are close to breakeven for a number of producers and price drops of more than $10-20/t may prompt some producers to idle production. Given that it is the beginning of a new year, the big annual contracts for China and India will be focal points for industry players.
A late season development for local buyers was the South African CFR potash price benchmark dropping by $5/t on the low end. This brings the CFR benchmark price to the low $360s. Most potash buying for the season is complete, with only the prospect of some late season maize in the West likely to draw some potash. Trade data to November shows that Q4 imports brought the year-to-date total in line with the prior year at 325,000t.
General Market Outlook
Crude oil prices sit in the $70s but the market is jittery about the Middle East situation
Brent Crude oil has opened the year in the high-$70s per barrel. Oil did show a Christmas spike touching on $81/bbl however it quickly reverted to the $70s, currently trading at $78/bbl. Oil prices are sensitive to political developments in the Middle East and the clash between the US navy and the Yemeni Houthi pirates have sparked concerns for shipping in the region and consequently impacted on crude oil values. There was some Christmas cheer for European gas buyers as the TTF Gas price broke below the $10/MMBtu but unfortunately did not hold there. The TTF index is currently at $10.5/MMBtu. The US natural gas prices rose from $2.4/MMBtu to $2.8/MMBtu as the new year generated a lot of trading activity.
Grain price developments in the past week have been extremely disappointing. This has partly been driven by the US Dollar strengthening versus other currencies, including the Rand which has lost 1% this week. Higher yields and unchanged planted area mean that forecasted production for 2024 is likely to be higher. Without an equivalent increase in demand, this is putting the supply-demand balance for grains into surplus (oversupply) and impacting prices.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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