Nitrogen
Urea price momentum continues this week but no sign of the awaited Indian tender
Last week’s excitement around an unexpected Indian urea tender has not yet translated into the tender being announced. In fact, it appears that the tender is likely to happen in March as originally thought – as pointed out last week, unless the Indians urgently require product now, it does not really make sense for them to buy during the present price spike as their tender would just add to rising prices.
In general the major producers are all comfortable with their stock positions – a number of producers are down at present, especially in South East Asia, and with China remaining absent from the urea export market, urea availability is relatively tight. This explains the current price rise.
Most of the real action this week was centred around Australia and New Zealand being in the market for urea cargoes. These are not huge markets but with limited urea availability from nearby Asian producers, these purchases were enough to keep prices moving upwards.
The USA urea market has been fairly buoyant this week, with demand said to be strong. Buying activity has however been focused on traders taking barge positions (i.e. buying product already physically present in New Orleans) which makes us question how strong this American demand really is. If demand was truly firm, then there should be substantial buying of spot import cargoes, which is not the case thus far.
Traders selling urea into Brazil were able to push prices up by $10-12/t this week, using rising prices in other regions as justification. But the appetite of Brazilian farmers remains pretty weak as low crop prices make the economic equation ever worse as fertilizer (or at least urea) prices keep rising. The Brazilian market will be slow for the next week as their Carnival holiday takes place.
There is growing consensus that once the current urea price spike runs out of steam, there is likely to be a large downward correction, probably around April, when demand peters out and the market moves into oversupply.
Ammonium sulphate kept some upward momentum on prices this week, with prices from China moving up $5/t for both grades. Trading activity in the two biggest markets at present, China and Brazil, will quieten down for the next week or two as both countries have major holidays starting. All eyes will be on the amsul market after these holidays to gauge whether there is still enough demand to support prices or if prices start to ease downwards.
Ammonium nitrate prices have kept rising as the Western European market is showing healthy demand after a few months of poor weather delaying interest. In Germany, demand for CAN this week sent prices up by €10/t and most AN/CAN producers around Europe are reporting good sales in recent weeks. The surge in urea prices and declining availability of urea has certainly helped the nitrates sector.
Ammonia saw some big price cuts in certain regions this week as the sector remains very weak. The Asian (Eastern) market remains particularly weak and the Middle East benchmark price saw a $75/t cut, taking the price down to around $325/t FOB. This makes ammonia a good 15% cheaper than urea on a physical ton basis, which is a rare occurrence and is good news for local nitric acid/ammonium nitrate producers as their raw material is cheap and the value of their finished goods is high.
Phosphates
Phosphate prices stable this week as the market is considered to be well-balanced between supply and demand
Phosphate prices were unchanged this week across most benchmark locations as trading activity remains muted. Low demand for product is being matched by limited supply and hence the lack of price action. Demand from the Northern Hemisphere is expected to ease off in the coming months and supply, especially from China, is expected to increase – that leaves prices heading for a fall in all likelihood.
DAP trading activity was a lot quieter this week as Indian players digest the news of the subsidy reduction. DAP economics are unprofitable for Indian importers at current levels. Phosphates demand in North America and Europe is reasonable and the higher DAP prices in those regions are attracting some volumes away from India and other Asian markets.
Brazil continues to exert the most influence over MAP prices, and the Brazilian price has essentially been static since October last year. The persistent pessimism around crop prices and soya in particular is constraining Brazilian demand for phosphates.
The phosphates market appears set for stability for the rest of this quarter. The next big test for prices will be the return of Chinese exports. Chinese exports are not expected to resume until their spring season is complete, which will likely be April at the earliest.
Potash
Potash prices slip a little lower this week across a number of regions
Potash prices shed a few dollars in almost all regions, with Europe being the exception. The Latin American fertilizer conference that took place this week saw the Brazilian price resume its downturn, with prices as low $275/t CFR Brazil being reached. This is further sign of the weakness of Brazilian demand and the pressure that growers are feeling around persistently weak soya prices. With Brazil and China closing down for national holidays over the next week, potash markets will be even quieter.
The US market appears well-supplied with potash and the falling soya futures values are now causing American buyers to put pressure on potash prices in particular. US potash prices dropped by $3-5/t – not a massive drop but a clear signal that the price is under pressure in that region too.
General Market Outlook
Middle East conflict twists and turns causing Oil price fluctuations
Middle East tensions continue to drive Brent Crude oil prices – Israel rejecting the latest ceasefire talks has pushed oil up from $78/bbl $81/bbl over the past week. The Dollar also weakened against other major currencies, which helped boost demand for oil as the weaker Dollar made it more affordable. The European TTF Gas price has hovered around $9/MMBtu for the past week. US natural gas prices have maintained their downward trend, dropping well below $2.0/MMBtu and currently sitting at $1.8/MMBtu.
International grain prices struggled again this week, with both maize and soya recording week-on-week declines. Local Safex prices looked a bit healthier this week, probably helped by the Rand weakening by 1.5%, with the all the major grains excepting wheat showing Rand increases.
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