Nitrogen
Unexpected return of India to the Urea market adds momentum to the current price spike
While not yet confirmed, this week’s activity was dominated by talk of India returning to the urea market with a tender, probably to be announced on 5 February. India was not expected to actively buy before March as domestic urea inventory is understood to be relatively high, and with urea prices having jumped $60/t in the last few weeks, it does not look like ideal timing to buy unless there is no alternative. With Asian and North African producers having sold their February volumes and China remaining absent from international urea trade, the Indians will need to source from Russia and the Middle East. With prices already bounding up, limited supply options may force the Indians to pay a hefty premium for urea.
Demand from Australia and Thailand has booked most of the available product from the South East Asian producers in the short term. Likewise European and Turkish buying has absorbed most of Egypt’s stock. Thus the urea market, especially in the Northern Hemisphere, looks quite tight for the month ahead.
It is no surprise that urea prices surged again this week, with the Middle East seeing a $20/t increase to approach $380/t FOB. This pushed the Brazilian urea price up by a similar amount but there were very few takers as demand for fertilizers in general in Brazil remains soft.
The Indian tender, if it takes place, will be key in setting urea prices for the month ahead.
Ammonium sulphate prices slowed down a little this week, with granular prices being flat and crystalline product seeing a small increase. Demand in a number of markets remains strong and is supporting prices, plus urea’s rapid rise helps too. Broadly amsul prices are expected to stabilize later this month as demand is likely to quieten down and the upcoming Chinese Lunar New Year will slow the trade of product from China, which is by far the biggest source.
Ammonium nitrate had another buoyant week as agronomic conditions in Western Europe keep improving and this is supporting demand for AN and CAN in that region. Consumption of AN in the FSU region remains healthy and the demand for nitrates has supported prices. CAN prices rose moderately in Europe this week as some of the bigger markets like France saw an improvement in buying volumes.
Ammonia continues to diverge from the rest of the nitrogen sector with prices remaining under downward pressure as demand is surprisingly weak. There were no major prices moves beyond a few dollars being removed from the Far East price but the outlook for ammonia remains pessimistic with lower prices likely in the coming month.
Phosphates
Phosphate trading activity increases this week, as the Indian government surprises the market by announcing a reduction in its fertilizer subsidy
DAP prices in a number of regions fell by a few dollars as buying picked up, led by India. It seems that sellers preferred to offer small discounts to generate sales as the outlook for phosphates prices is leaning more towards lower prices in the coming few months. The Indian government announced that it will be reducing its subsidy for phosphate (and potash) fertilizers by a hefty 34%. This is not what the market was hoping for as Indian domestic prices already render DAP imports unprofitable. A much lower subsidy is going to dramatically curb Indian buying unless phosphates prices decline massively.
With China getting closer to reopening phosphate exports, phosphate supply seems set to rise and the market balance will lean towards oversupply. This is expected to cause phosphate prices to decline towards Q2. Indian buying will resume if/when DAP prices become more affordable, so we may see producers electing to take some price pain in the short term and at least secure volumes to India.
The MAP market remains stagnant due to the lack of interest from Brazil – although the Brazilian MAP price has been unchanged, soya values keep declining, which has hurt demand for phosphates in that region.
The Q1 Indian phos acid contract price has been settled – the new price is $968/t CFR India, which is $17/t down on the Q4 2023 price. A lower price was widely expected.
Foskor is understood to have concluded the sale of an MAP cargo to the USA, which is first. MAP availability worldwide is quite limited and with the local summer rainfall season now over, Foskor has taken the opportunity to make a rare MAP export rather than build stock.
Foskor and PureFert are also offering MAP for the upcoming Cape season with both producers planning vessels to Cape Town. The product is reportedly being offered at the same price as MAP delivered to Brazil. This is a little more expensive than phosphates supplied into Durban but considering the much smaller volumes sold in the Cape, the price is reasonable.
Potash
Potash markets remain bearish as prices fell in Europe and South East Asia this week
Potash sales around the world remain below expectations, despite this being the peak demand period for the Northern Hemisphere. This week saw the price in Europe fall again and the South East Asian benchmark dropped by another $5/t. Potash prices in most markets are now in the low $300s.
Higher freight rates are causing netbacks for potash producers to deteriorate as these producers are unable to pass on higher shipping costs to their customers.
The news of the large reduction in the Indian subsidy for potash will also hurt potash demand in India and add further pressure to the potash price. The Indian annual potash contract price has not yet been settled and the lower subsidy will affect the final number, now expected to be below $300/t CFR.
Please note that last week’s Durban import parity costing was incorrect as published – the correct value (for last week) of R6,917/t is included in the table above. This week saw the South African potash price drop by close to $10/t more. The SA potash price is now around $330/t CFR Durban, which is 10% higher than Brazil. The improvement of the Rand this week help reduce the local cost of potash by almost 3.5% week on week.
General Market Outlook
Energy prices decrease across the board as tensions ease in the Middle East
This week brought a sharp reversal in Brent Crude oil prices which fell from $82/bbl to close this week at $78.7/bbl. Increased prospects of a ceasefire between Israel and Hamas lowered concerns of a widespread Middle East conflict and reduced risk premiums around crude oil. The decision to keep interest rates unchanged in both the USA and the UK has also reduced the outlook for oil consumption. Lowered geopolitical concerns helped the European TTF Gas price drop below $9/MMBtu once again, while natural gas prices in the USA dropped to 8-month lows almost breaking below $2.0/MMBtu. Milder weather and high stock levels pushed US gas prices down.
The Rand managed a moderate recovery against the US Dollar this week, almost reaching R18.50. The Dollar was impacted by the US Fed electing to keep interest rates unchanged, versus a market expectation of a reduction in the rate.
Grain prices were stable to weak this week – Safex maize prices remain in the mid-to-high R3,000s. The big loser has been soya, where the weakening international price has now played through into the Safex price. In the past month, soya has dropped from R8,900/t to below R7,800/t. The poorer outlook for soya is reflected in soya plantings for this season, which are estimated to be 10% lower than the 2023 area. The 2024 maize acreage in South Africa is 2% higher than the 2023 planting.
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