Nitrogen
Indian tender yields lower Urea prices but market may be set for a price rebound for January and into February
The Indian Urea tender offers were opened this week, with low offers of $316/t (west coast India) and $329/t (east coast India). As usual, the Indians countered all offers at these numbers, with around 650,000t being confirmed. This is lower than the 800,000t that the Indians are seeking – perhaps indicative of the low number being unpalatable for most of the participants and maybe also a sign that the urea market is not as oversupplied as many believe. The Indian domestic market remains well-stocked with urea thus the secured tender volume does not pose any concerns. The Indians are likely to wait until March for their next tender. The big unknown at this point is whether the 650,000t fixed under the tender is enough to tighten the urea supply-demand balance (and therefore support higher prices) or will producers find themselves under pressure to shift volumes during February.
The Indian tender price translates to a Middle East FOB urea price of low $290s per ton, which is the low end of the Middle East price range. Buying activity from a number of traders pulled urea prices up late in the week and we saw some spot prices in the Middle East approaching $330/t. The average price for the week, which is the basis of our price, was around $315/t, which is lower than last week but in practice, Middle East urea price has moved up.
Sales of Egyptian urea, which mostly goes to Europe, sparked to life this week with the price running up almost $40/t. Much of this activity is explained by traders with European obligations rushing to cover their requirements for the short term. Such a big run up in prices could be an early indication of urea prices starting to firm across the globe. A strong urea market at this time of year would be normal and the weakening prices of the past month are a deviation from historical trends.
The Brazilian market was extremely subdued and traders trying to test that market with higher prices received zero interest – Brazil has adequate urea inventory for now and with the crop price outlook continuing to look gloomy, Brazilian fertilizer buyers are happy to remain out of the market.
In North America interest in urea cargoes remains very quiet but the US supply-demand outlook indicates that they are probably short of urea for spring and American buying is expected to increase during this month and through February. If urea prices do start running up, this may prompt US buyers to return to the market more rapidly – which is likely to fuel an ever faster rise in urea prices for this quarter.
China is expected to remain absent from the international urea market until at least February, so we may well see urea prices firming for the next 3-4 weeks and the return of China, if that does indeed occur in February, may be the next test for urea prices. Our view is that urea prices could well run into the mid-$300s (i.e. $350/t of thereabouts) but above that level a lot of supply gets pulled into the market, especially from sanctioned origins like Russia and Iran, which is likely to balance supply and demand and create a ceiling for prices.
Demand for Ammonium sulphate has picked up this week, from both fertilizer and industrial users, which has supported a small increase in price. Chinese prices for both crystalline and granular grades rose by $5/t – with urea prices showing signs of firming too, amsul may well see higher prices in the coming weeks.
Ammonium nitrate prices continue to suffer from lack of demand in Western Europe due to ongoing wet weather hampering farming operations. In Eastern Europe and Russia, local demand has been reasonable and most AN production in that region has been sold into the domestic market. CAN prices are flat and urea still represents a much cheaper form of nitrogen, which has seen EU buyers focus on sourcing urea over CAN/AN despite the rising urea price.
Ammonia prices in Far East Asia took a big drop this week but this transaction was limited to one small cargo. Elsewhere ammonia prices were unchanged – demand is reported to be very limited in almost all regions, which suggests prices may remain under pressure. Most of the major ammonia export producers appear to have sufficient sales already booked such that they are not chasing new business.
Phosphates
Phosphate trade was sluggish this week, with relatively tight supply being countered by weak demand
The phosphate market continues to be in limbo as participants watch India for news of a revised phosphates subsidy. Without an increased subsidy, Indian purchasing of phosphates remains uneconomic and while supply of phosphates is said to be tight, there is no pressure on sellers to consider lower prices. This is leaving phosphates prices ‘stuck’ at current levels.
How long the current impasse remains in place depends to a large extent on China remaining out of international phosphate trade – there is little doubt that if Chinese exports were in the market presently, phosphate prices would be falling.
MAP prices are in limbo due to Brazilian buying being on pause – the economics of increased phosphate application for soya is being discouraged due to declining soya prices. Brazil has ample local stocks of MAP and there are a number of ‘floating’ MAP cargoes awaiting discharge at Brazilian ports. Brazilian MAP imports for 2023 were 27% up year-on-year and hit a record 5.2 million tons.
DAP prices are static this week although a fair amount of contract volumes were sold, particularly to the US. Chinese DAP production is being cut back because the Chinese local market is flooded with product and no exports will even be considered before the start of March. Market participants are hoping that the Indian government makes a move on adjusting its phosphate subsidy soon to give the market some clarity. The likelihood is that any subsidy revision will only occur during February when the Indian interim budget is announced. Phosphate prices seem set to hover at current levels for the next month or so in that case.
Potash
Potash prices see minor falls at most benchmarks this week
The USA and Brazil saw potash prices easing down this week. The US price fell as some of the potash majors such as Nutrien announced prices for the upcoming spring fill programme. American prices are substantially higher than Brazil and elsewhere, so the small discount on prices is intended to stimulate American buying and hopefully taking the pressure off Canadian producers to keep focusing on lower-valued sales to South America and South East Asia.
Trading activity for potash in Brazil sparked to life this week as traders start to chase buyers – with the poorer outlook for maize and soya for the upcoming Safrinha season, traders are now chasing business before the agricultural economics get any worse, or at least that’s the rationale being given. The Brazilian benchmark price is now approaching $310/t CFR but there is plenty of chatter suggesting that potash was being offered at below $300/t. Further price reductions may come in the next few weeks.
Europe remains the highest priced potash market but a big downward adjustment is looming as planting conditions remain poor, meaning demand is low and farmers aren’t going to buy potash at current prices (€400/t or higher).
The South African CFR potash price benchmark fell by $10/t this week as importers start to chase late season sales. This brings the ex-Durban warehouse cost of granular potash close to the R7,000/t level – a number not seen since June 2021.
General Market Outlook
Military action in Yemen upsets energy markets, while grain values keep sliding downwards
Brent Crude oil spent most of the past week trading between $76-77/bbl but military activity by the US and UK against Yemen in the past 24 hours has pushed oil prices up towards $80/bbl. In Europe gas buyers have continued trending downwards as TTF Gas price has fallen back below $10/MMBtu. Driven by cold weather demand, US natural gas prices have continued rising, moving from $2.8/MMBtu to $3.2/MMBtu over the past week.
The Rand has held steady in the R18.60-18.70 range this week.
Some increases in yield (supply) estimates for the main cereals and oilseeds this week caused prices to fall again. Week-on-week, the international prices for maize, soya and wheat dropped by 1.5-2% - maize and soya are the lowest they’ve been in more than a year. The weak Rand has protected Safex prices although these also fell substantially this week.
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