Nitrogen
Urea market keeps moving higher but buyer interest is limited at these prices
With May’s volumes being sold out and most of June’s production now committed, Urea price quotes kept moving up this week. Spot buying interest is quietening down quickly, leaving producers to focus on contract business. Most of the major benchmark locations saw higher prices this week.
It is interesting to note that Australia, with its similar seasonal demand to SA, has continued to buy large volumes of urea this week. Its latest purchases have come from Indonesia, which has a freight advantage into Australia. It is evident that the Australians have decided to buy urea early this year, presumably with the view that current prices are the best they’re going to get ahead of next summer rainfall season.
Middle East prices added another $20/t this week, sitting at $310-315/t FOB. Only a handful of spot deals were done but producers are apparently comfortable with their stock positions after substantial sales during the past few weeks.
South American buying was led this week by Argentina, which paid up to $345/t CFR. Brazilian buyers were much more reluctant to commit to higher prices and trading activity was a lot slower – the Brazilian urea price rose around $13/t, putting price levels there into the $330s.
Very hot and dry weather in India has seen fertilizer sales slow down and urea consumption is lower than normal. This has ended rumours of an Indian urea tender for June, with Indian domestic stocks of urea at very high levels for the upcoming monsoon season.
It looks like the urea market is likely to stabilize over the coming few weeks, as sellers/producers aren’t chasing sales and buyers are under no pressure to buy, being the quietest demand period of the year. As we get later into June, urea prices will be tested again – there is a split in opinions as to whether urea will decline again before starting its normal seasonal escalation through September to December, or simply continue rising from current levels through the rest of the year. Our view is that the latter scenario is the more probable at this stage.
While urea sales in Brazil have been slow, the same has not been true for Ammonium sulphate where strong sales have seen a gradual rise in prices. Both crystalline and granular product from China has seen a $5/t up-tick in price this week. Higher urea prices seem to be encouraging Brazilian demand for amsul, despite the demand for urea itself being quite weak. Amsul production in Europe is around 50% of capacity due to summer maintenance shuts, which has tightened the market and is supporting higher prices in that region too.
Ammonium nitrate market participants have been anticipating higher prices due to urea’s increases in recent weeks but so far AN prices are unmoved. Demand in Brazil for AN is weak and top-dressing sales in Europe are about average compared to historical levels. High gas prices and a reasonably firm ammonia price in Europe means that AN and CAN producers are under some margin pressure.
Ammonia market saw the eastern and western markets converging this week. The Eastern Hemisphere prices rose, with the Middle East up $25/t and the Far East up by $10t – putting that market in the $350-400/t range. The Western hemisphere saw lower prices at Tampa as the fortnightly contract price dropped $50 to $400/t CFR. With a a number of Asian ammonia plants still down for maintenance, it seems that prices may continue to rise and $500/t may be reached.
Phosphates
Phosphates market continues to strengthen, with price ranges narrowing in anticipation of further rises
The mood in phosphate market is growing ever more bullish as demand in Brazil and India is lifting prices. Other than some Chinese exports, there is limited product available for prompt shipping, which is adding to the firming of prices. In fact the increase in the Indian price is the first upward movement since January of this year.
DAP prices are being supported by Chinese exporters refusing to entertain further price reductions. This has driven Indian prices up by a few dollars. The economics of imported DAP into India remain marginal but Indian domestic stocks are extremely low, which raises the question of how long Indian importers can delay buying in greater volumes.
Brazilian purchasing of MAP prices was up this week this week, causing a $10/t increase in price to $580/t CFR. Brazilian imports of MAP for this year are lagging prior year volumes, which suggests that there could be a lot more Brazilian buying in the short-term. Similarly, the US market is very short of MAP and competition for the handful of MAP cargoes that are available between the US and Brazil is likely to support even higher prices in the coming months.
The Saudi MAP price was unchanged again this week, leaving our import parity cost calculation much the same at R11,100/t ex-Durban but with MAP prices in Brazil and the US higher, it seems certain that the Saudi (and thus our Durban) price will be up in the next week or two.
Potash
Limited action in the Potash sector this week with prices unchanged
The only real discussion point in Potash circles currently is around the Indian annual potash contract price which is still keenly awaited. Hopes are that the contract price is agreed by mid-June and that should encourage some trading as buyers will take more confidence in the price direction.
The big markets of Brazil, South East Asia, Europe and North America were all quiet this week with prices staying flat but the mood is leaning towards lower prices across the globe.
The first major shipments of potash into Durban for the upcoming summer season are now being planned. Most of the major potash importers still have some stock but are looking to increase their positions. The talk is that prices will be higher by season time but at this stage, there appears to be limited risk of higher prices for the next month or two.
General Market Outlook
Energy prices stabilise
Brent crude oil remains in the low $60s per barrel, as fairly weak economic data from both China and the US is impacting oil demand. Crude oil did briefly touch on $84/bbl this week but has return to $81/bbl where it began the week. Gas prices in Europe remain elevated as the EU TTF price is holding at $10.75/MMBtu due to Russian gas curtailments to certain countries in the EU. US natural gas prices continue to trade between $2.5-2.6/MMBtu.
The Rand lost 1.5% this week against the Dollar, apparently caused by the election situation. This added to higher import parity prices for fertilizers across the board, although there was a small reduction in shipping freight rates that offset a little of the Rand’s weakness.
Grain prices were a mixed bag this week as all the international benchmark prices were sharply down – the CBOT maize price was down almost 3% and soya and wheat were down 2.5% in Dollar terms. The weaker Rand and the usual lag between local and international values meant that Safex prices for all the cereals and oilseeds were up by between 1 and 3% week-on-week. Of course, if the Rand strengthens or the lower dollar prices are sustained, then Safex numbers are likely to drop off over the next week.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
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