Nitrogen
Urea prices tick up again this week as supply and demand are in balance
Most of the major Urea benchmark prices moved up further this week. There were no major fireworks as prices rose $5-10/t in most regions. Prices in the destination markets such as Brazil and the USA moved up more significantly to reflect the higher origin prices, as well as higher freight.
Buying activity was greater this week, which indicates growing acceptances these higher prices. It is normal for there to be strong demand at this time of year as the Northern Hemisphere gears up for spring planting.
Egypt continues to lead the pack in terms of prices, with numbers of close to $400/t being reported. As we’ve pointed out previously, lots of the high-priced trades are for small parcels of 5,000t – the weighted average price is probably a fair bit lower.
Asian demand is providing most of the support to prices at present. The Chinese remain absent from the urea export market and Indonesia is also not offering any product for export. Malaysian production is low with one plant offline and another due for a maintenance shut in the coming weeks. India is importing decent volumes under its recent tender award, along with its usual contract volumes. Australian and Thailand are showing an appetite for urea imports – thus Asian supply and demand are well-balanced and perhaps even tending towards being tight, which is supporting the current price rise.
The Brazilian urea price rose around $10/t to approach $370/t CFR, which keeps it inline with international prices. Buying volumes remain low though, as unfavourable crop economics are depressing demand for fertilizers in the country.
European demand remains positive as wholesalers and distributors in the region rush to source urea to refill inventories after many months of inactivity.
Market opinion suggests that urea prices will remain at the current firm levels for at least the next month or so. Some further increases are quite likely, however $400/t is likely to be a ceiling –fundamentals do not really support prices beyond this level, so there will need to be higher than expected demand and/or some restrictions on product availability to sustain further price rises.
Ammonium sulphate maintained its recent trend of moderate weekly price increases. Once again local demand in China is the reason given for strengthening amsul prices, however traders are suggesting that this demand could weaken after the Chinese lunar New Year in 2 weeks. Rising urea prices are dragging nitrogen values up, which helps support amsul prices but demand for amsul in the key Brazilian market is very weak and once Chinese demand for the product drops away, it seems likely that prices will begin to fall towards March.
Ammonium nitrate markets are benefiting from the optimism driven by improved weather for planting in Europe and rising urea values. Russian AN prices jumped by almost $30/t this week to above $230/t FOB as European traders competed with domestic Russian demand for product. CAN prices in Europe have remained flat for now – although demand has increased, lower gas prices in Europe have reduced production costs and CAN producers have raised their operating rates to boost production.
Ammonia markets look weak/bearish due to low demand – despite urea prices moving in the opposite direction. This week saw the Tampa contract price being adjusted down by $80/t to sit just below $450/t CFR. Asian ammonia prices keep heading down with prices in the Far East now below $350/t CFR. Production at the major export locations is reported to be going well, meaning there are few supply constraints that might support higher prices.
Phosphates
Phosphate prices remain stable as DAP buying by India surges
Indian buyers were active this week in buying more than 150,000t of DAP and issuing a tender for 150,000t more. This is despite the economics of DAP imports being unprofitable. The Indian buying was not enough to push phosphate prices higher but the volumes sold will ease the pressure on producers with rising stocks. Indian traders are awaiting the interim budget from the Indian government with interest – they are hoping that an increase to the phosphate subsidy will be announced in mid-February.
Even with this latest round of Indian buying, the phosphate supply-demand balance is beginning to tilt towards oversupply once more. Without increased buying from the Northern Hemisphere markets that are approaching their spring season, phosphate prices seem set to begin declining. Any increased volumes from the major producers or the return of Chinese phosphate exports will certainly tip the balance and push prices down.
MAP prices were unchanged again this week at both the main benchmark locations – Brazil and Saudi Arabia. The story around poor soya economic in Brazil remains the dominant theme in MAP price discussions – there is even talk that Brazilian farmers are turning to alternative phosphate sources that might be slightly cheaper.
Improving weather conditions in Europe have seen demand for phosphates pick up, with OCP being the beneficiary in concluding a number of phosphate sales to Europe this week.
In local news, the Kropz phosphate rock operation in Elandsfontein in the Western Cape reported export sales of around 260,000t for 2023. The project finally entered commercial production last year after years of delays and huge cost over-runs.
Potash
Potash prices dipped throughout North America and Europe this week
The pessimistic mood around potash prices continues as a number of major Northern Hemisphere markets saw prices dropping. The markets were over-priced in comparison to Brazil, India and South East Asia, so these price movements can be seen as corrections to align with international trends. Potash producers will console themselves with sales volumes picking up in Europe and the USA at long last.
The Brazilian price seems to have stabilised for now as buyer interest remains low amid the poor demand outlook in the country, especially for soya. There is unlikely to be much movement in the Brazilian price until the upcoming FLA conference in 10 days’ time. Despite all the doom and gloom around the poor state of the Brazilian potash market, more than 1 million tons of potash imports were booked for the month of January, close to double its January 2023 volume.
The outlook for potash prices in general remains stable-to-negative.
General Market Outlook
Increased geopolitical tensions drive Crude Oil prices upwards
Brent Crude oil prices rallied by around 4% this week, rising to $82/bbl as ongoing unrest in the Middle East and the prospect of government stimulus in China supported higher prices. Ukrainian attacks on Russian oil and gas infrastructure pushed the European TTF Gas price up to $9.2/MMBtu from $8.6 earlier this week. Natural gas prices in America were driven up slightly by very cold weather to $2.8/MMBtu.
The Rand had another rough week peaking at over R19.20 to the US Dollar earlier in the week. It strengthened to R18.90 but US Dollar strength is likely to keep the Rand under pressure in the short term.
Shipping rates for the key routes to South Africa rose by a few dollars per ton this week, driven by increased insurance premiums due to Red Sea pirate/terror concerns and also the increase in oil prices meaning fuel costs are higher. Overall the index for handysize vessels, which is the vessel class mostly used for bulk fertilizer shipping to South Africa, has trended downwards from the peak seen in mid-December. Of course it is now a quiet time for fertilizer imports into South Africa, with the Western Cape season slowly ramping up and some late season imports into Mozambique for Zimbabwe and Zambia being the only real action.
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