Nitrogen
Urea prices slid lower again this week but heavy sales volumes for May suggest the price could stabilise
The Middle East urea price dropped another $6-7/t this week to fall just below the $270/t FOB mark. Sales to Australia and SE Asia have been the drivers of Middle East trade this week. Interestingly, Chinese urea sales have slowed down – Chinese urea traders would usually target this business quite aggressively but stronger than expected domestic demand and low international prices have calmed China’s urea exports for now.
Keep in mind that a substantial portion of urea trade worldwide is done under contract and these contracts use the published prices to determine the contract prices via a formula – with urea prices being low right now, a lot of contract customers have been booking cargoes to take advantage of favourable pricing. This has seen a large chunk of the stock build-up amongst urea producers for May being committed. This may take the pressure off some urea producers to chase sales and prices may start to stabilise.
Prices in Europe and North America were stable this week with most of the spring and early-season requirements already having been met. Some traders are starting to go long on urea for top dressing into these markets, considering how low urea prices seem to be at present. It is early for farmers to start top dressing purchases in big volumes so American and European traders are taking something of a gamble.
The North African urea producers in Egypt and Algeria continue to target a price of around $285/t FOB but are struggling to find serious interest at that number. There is some buying interest from around the Mediterranean but the likes of Turkey are happy to buy Iranian product, which will keep the pressure on the North African sellers.
The price spread in Brazil narrowed this week (i.e. the high and low prices moved closer together) but overall the average Brazil price didn’t move much. The biggest news from Brazil this week was the severe flooding seen in the south of Brazil. The biggest agricultural areas are in the centre of Brazil but the south does have some extensive farming areas and the port of Porto Alegre is a major import point for fertilizer going into the southern states – Porto Alegre is reported to be completely underwater, so a big impact on fertilizer stocks and imports can be expected there.
Urea has now dropped $100/t in the last 2 months (7 March value was $269/t FOB Middle East or R8,014/t ex-warehouse in Durban). The outlook for the next couple of weeks suggests that further falls are somewhat unlikely as most producers have now sold their May volumes and they are anxious to stop the bleeding on price. The big question is thus around June and what sales (supply) versus demand will look like for June. Indications are that the market be long again and we could see prices drop lower. The annual IFA conference takes place towards the end of May and is the main industry gathering of the year – prices of all fertilizers are unlikely to move massively until this event has taken place.
Ammonium sulphate prices have stalled as buyers are pointing to urea prices falling and wanting the same for amsul. Brazil demand for amsul slowed this week and this pushed the price of crystalline amsul down. Granular amsul is holding steady.
Ammonium nitrate prices are under pressure thanks to urea prices – Brazil is only the only big buyer around and traders are having to offer discounts to attract much interest. It is too early for serious top dressing interest for AN and/or CAN in Europe and prices for nitrates in that market are stable/flat. The export ban for Russian product to load out of the Baltic (St Petersburg) remains a big constraint for Russian AN export sales.
Ammonia prices in the Eastern hemisphere firmed significantly this week. The Middle East ammonia price jumped $40/t to move towards $350/t FOB. The Far East price also moved up, although not by as much. Most of this price movement has been driven by tighter availability from the export producers across Asia – the Saudis, Indonesians and Malaysians are all indicating lower production for various reasons and this has supported the up-tick in prices. The Western Hemisphere price is still a good $100/t or more higher than any of the Asian benchmark prices.
Phosphates
The Phosphates price slide has slowed down but the outlook remains bearish
Phosphate price volatility has quietened down in the past week – the primary market developments have been limited to DAP prices dropping around $10/t in China and India. As would be expected, the trade flows from China to India are responsible for the bulk of deals being done this week.
Indian buying has picked up pace as importers are under time pressure to get phosphates into the Indian market for the Kharif season. Indian breakeven values for DAP, after subsidies are considered, is around $485/t CFR India, so the price of above $500/t reflects a loss for Indian traders. The pressure is clearly on for lower DAP prices or Indian buying will slowdown.
MAP prices were unchanged across all the main benchmark locations this week. MAP is trading at a premium of more than $70/t over DAP, which is unusual by historical standards. The constraint preventing the gap from shrinking remains the limited supply of MAP. Most phosphate producers are electing to focus on DAP, which is the Indian phosphate of choice and Brazil is buying most of whatever MAP comes up for sale. This is leaving the smaller MAP markets having to scramble to find product. Fortunately most of these markets are out of season currently – the likes of Australia and ourselves. But it does raise the risk flag for MAP availability when our summer rainfall season begins.
Potash
Not much activity in Potash markets, with price sentiment still leaning towards lower values
None of the major Potash benchmark prices saw any meaningful movements this week. Demand is usually at its lowest in May and potash market players are patiently waiting for a signal from one of the major price ‘events’ of the year – at the moment the main outstanding pricing event is the Indian annual contract price, which has still not been finalized more than 4 months into 2024.
Once again, this week saw the European price edge a little lower as demand is soft and prices there are higher compared to everywhere else.
Activity into Brazil has been hampered by the flooding story in the South, although shipments into other ports should be unaffected. Only 10-15% of total potash imports to Brazil are channeled through Porto Alegre/Rio Grande, so the disruption to potash imports is minimal in the bigger picture.
With the market being so dead and the IFA conference coming up in a few weeks, no large price movements will happen until after the conference as market players will wait for face to face meetings. Somewhat predictably, the Indians have now officially postponed their annual potash contract price negotiations until 30 May, i.e. until after the conference has taken place.
General Market Outlook
Energy price rising, all eyes on Brazilian floods for possible impact on crop prices
The rollercoaster that is energy prices continued this week. Brent crude oil dropped to $83/bbl a week and since then has taken some steps back up again. Oil is presently trading at $84.5/bbl with signs of stronger demand from China and the US driving the price up.
Natural gas prices storage levels were lower than expected and this has driven the EU TTF gas price sharply up over the past week, rising above $10/MMBtu briefly and presently sitting at $9.5/MMBtu. US natural gas prices have also firmed, rising from $2/MMBtu to $2.3/MMBtu.
This week saw the recent gains by the Rand versus the Dollar playing through on Safex prices. White and yellow maize lost 2 and 3% respectively over the past week. The CME price for maize also dropped by 2% this week, suggesting that further declines may be ahead for local maize prices. The oilseeds remains strong however and soya in particular had a very good week, gaining more than 5%. The market will be watching the flood issue in southern Brazil closely to determine what impact this will have on total Brazilian production and how this may affect crop prices over the coming months.
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