Nitrogen
Urea prices continue to firm and expected to keep rising for at least the next month
The IFA annual fertilizer conference took place this week and brought most of the industry together. The question around the current Urea prices surge being the start of an upwards trend or just short term ‘noise’ seems to have been answered. Consensus points to prices rising on the back of available stocks being sold out through to the end of June. This suggests that producers will be able to push through regular price increases while demand for urea remains strong.
Prices in the Middle East gained $10-15/t and are approaching $300/t FOB. It is not clear where these spot sales that are driving prices up are coming from. The majority of Middle Eastern urea volumes continue to be sold under contract to the big markets of India, USA and South America.
Brazil also saw urea prices rising around $10 to trade at $320/t CFR, however only a handful of spot transactions took place, indicating that demand in Brazil is still on the weaker side.
The North African producers of Egypt and Algeria have been able to capitalize on sales to South America and Europe that has enabled them to achieve prices of $320/t FOB.
There have been suggestions that the Indians may hold a urea tender at the end of June. This would be much earlier than previously expected and high domestic Indian urea stocks suggest that they do not need to tender. This may be driving some of the trader buying in anticipation of participating in the tender. If the tender is indeed held, then this would certainly support higher urea prices.
China continues to sit on the sidelines as far as largescale urea exports go. This will be an important flag for prices – if urea prices continue rising, the Chinese will become increasingly tempted to benefit from these higher prices and return to exporting. An increase in Chinese exports will of course tilt the overall supply-demand balance more towards oversupply and could halt the current price rise.
Ammonium sulphate prices were mostly flat this week, with granular product increasing by a few dollars. Brazilian demand for granular amsul continues to be strong and a lot of product has been purchased. Buyers are however very sensitive on the price and are rejecting any higher numbers.
Ammonium nitrate prices increased moderately in Europe this week. This price hikes are driven by the high cost of production in Europe, stemming from the sustained high price of gas coming from Russia to Europe, and EU producers doing their best to pass their costs on to their customers. AN and CAN production is lower and limited availability may enable producers to push higher prices into the market but at present, buyers are choosing to reject these prices and rather wait. This may have an impact on the Southern African planting season as AN and CAN imports have risen steadily over the past few years and most of this product is sourced from Europe – if product is scarce, then there may be a shortage of product for our market and/or higher prices.
Ammonia was stable this week as the market is broadly in balance. The Eastern Hemisphere had been a bit weak but the maintenance closures of some major ammonia producers in the Middle East and South East Asia have tightened the market. There were no significant price movements this week – Europe and North America remain at $450/t CFR and the Asian price is around $400/t.
Phosphates
Phosphates market is now seen as being bullish, with prices starting to rise
Prices were broadly stable this week across all the major benchmark locations. Market sentiment has become more bullish that phosphate prices may begin to rise, or at very least the recent decline in prices is probably over.
The DAP price remains heavily dependent on Chinese trade and the volume of Chinese exports will determine price direction. China is expected to export anything from750,000 – 1 million tons of phosphates per month for the next few months before export restrictions likely in Q4.
DAP prices in India have now stabilized and the price of $510/t CFR is very close to the breakeven level for Indian importers once subsidies have been factored in. Local Indian demand for DAP remains strong, suggesting that Indian buyers will continue to buy actively in the world market.
MAP prices were also unchanged this week and MAP is seen as being more likely to see increases because of much more limited availability than DAP. While demand for MAP in Brazil remains subdued, the reality is that Brazilian consumption of MAP is so enormous in comparison to all other MAP markets, so Brazilian imports will keep the market tight.
Canada and the USA who are the 2nd and 3rd biggest MAP importers after Brazil, are reporting that their domestic MAP stocks are very low and these countries are in the midst of application season now – if these countries return to the market looking for MAP, then this may well trigger higher prices.
Potash
Potash prices still trending towards lower values
Feedback from the IFA conference this week pointed to Potash prices softening in the coming months. The Indian annual potash contract price is attracting a lot of attention and has still not been settled – speculation suggests that a number of $280-285/t CFR India should be achievable. This contract price will set a new benchmark for a lot of potash trade, especially into Asia.
The Brazilian potash price dropped by a few dollars and currently sits just above $300/t. Brazilian imports are likely to start ramping up from next month as potash is sourced ahead of the summer application season.
The local South African potash price remains unchanged in dollar terms. Some Belarussian product is being offered locally – Belarus is the subject of severe American and EU sanctions, although South Africa does not have such sanctions in place.
General Market Outlook
Energy prices slightly lower and Crop values up this week
Brent crude oil prices declined significantly this week on the back of news of high oil stock-levels in a number of major markets and also the US Fed indicating that it will hold interest rates higher for longer than expected. This pushed oil prices down from $84/bbl a week to below $81/bbl presently.
On the other hand, natural gas prices in Europe rebounded sharply on news that Russian gas exports to certain EU countries were being cut back or halted completely – this sent the EU TTF price up 15% to $10.9/MMBtu. US natural gas prices remain stable at $2.6/MMBtu.
This week brought good news for grain farmers as both local and international prices for cereals and oilseeds rose strongly. International prices were supported by US planting behind schedule due to wet weather over wide parts of the Cornbelt. The flooding issues in Southern Brazil are still concerning the market as the full impact is not yet understood and this is being priced into maize and soya.
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