Nitrogen
India tender supports strong Urea pricing…for now
As is usually the case, an Indian Urea tender keeps the market players busy with all sorts of speculation in the build-up to the tender offer deadline. With worldwide demand still being on the slow side, no one is stampeding in to buy and producers are also content to hold back in the hope that they can earn a premium, either from traders or in the Indian tender. The range of prices being talked about is $345/t CFR India on the low side and $380/t on the top end (equivalent to a Middle East basis of $330-355/t FOB). The Indians are indicating that they’re targeting a price of no more than $350/t CFR. Considering the relatively low availability of product from the low cost producers, this suggests that the Indians are likely to either fix lower volumes than planned or perhaps nothing at all if the tender prices are deemed too high by them.
With all the rumour and speculation floating around, there was little major trading in urea this week. The Middle East price was raised by around $10/t to approach $350/t FOB, but this was based on a high price achieved with the sale of a single cargo to Sri Lanka increasing the upper end of the price spread.
Egyptian urea production is attracting attention as variable gas supplies to the big producers there have caused plants to stop and start. The latest information indicates that all the big plants are back up and running and product should be available shortly. There may be a small backlog in deliveries because of the recent outages but overall this should not impact regional supply-demand too significantly.
US urea prices were down this week but this is mostly due to indications from the USDA (US Dept of Agriculture) that plantings for this season are well on track and a big crop is anticipated – this is not really logical as a big planting of maize and wheat implies increased nitrogen usage, rather than less. However fertilizer traders interpret a lower maize price forecast as an immediate threat to nitrogen values in the US and prices have fallen as a consequence.
Despite the market expectation of strong urea prices in the very short term (next few weeks), it seems increasingly probable that urea prices are going to see a downturn during July/August as present price levels are not sustainable.
Somewhat contrary to the recent nitrogen price trend, Ammonium sulphate prices from China dropped a few dollars this week. It seems that Chinese traders are not confident in the strength of nitrogen prices in the coming weeks and elected to chase sales volumes rather than higher prices this week. The Brazilians were also quiet in the market, which added further downward pressure on the amsul price.
Ammonium Nitrate markets were mostly quiet, as the European season is done and Brazilian demand is moderate at best. Russian AN exporters were able to achieve a $10/t increase on AN sales to Brazil but volumes were on the low side. A number of CAN cargoes have been booked from Europe, Russia and Turkey for the South African market – the first of these is busy loading and all should arrive before the end of August.
Ammonia markets continue to experience different levels of demand between the East and West. The Western Hemisphere, particularly in the USA, is experiencing reasonable strong demand and prices continue to edge upwards in the low to mid $400s. The broader Asian market remains quiet and the delayed restart of the one of the Ma’aden mega-ammonia plants has not been enough to shift prices upwards.
Phosphates
Phosphates markets remain tight, which is supporting higher prices
Phosphates prices kept rising this week as limited supply is obliging buyers to pay higher prices to secure volumes. There have been a number of phosphate tenders closing across Asia in the past week and the offers all show much higher values than even the spot prices – suggesting that prices are going to keep going up in the next few months.
The major DAP benchmarks all showed increases of $10-15/t this week. The China DAP price is now above $550/t FOB and the Indian price is at a similar level, suggesting that Indian buyers won’t be purchasing much DAP from China at present. Tender prices have been nearer $580/t, indicating that the Chinese should have no difficulties in moving whatever volumes they have available for export.
The US bucked the trend of higher prices, with lower crop price forecasts and the slowdown for the Independence Day holiday seeing US phosphate prices declining slightly. This is likely to be a very short-term phenomenon.
The big increase seen in the Saudi MAP price last week is still filtering through the market. The Brazilian MAP price has risen by $15 as buyers are getting jittery about MAP availability as we move into Q3. The Brazil price is now well above $600/t CFR
All of the other phosphate products, such SSP, TSP and NPS, are seeing their prices firming as buyers look for alternatives to MAP and DAP.
The outlook for phosphates prices for Q3 is therefore quite bullish, with most of the industry expecting prices to keep rising.
Potash
Potash continues to suffer from weak demand and the lack of major contracts being concluded is leaving the market in limbo
This week was extremely quiet in potash circles as most benchmarks remained unchanged and trading volumes being lower than usual. Both the Indian and Chinese annual contract prices are now outstanding and the industry is awaiting the outcome of these to provide a basis for pricing as Q4 demand approaches. The latest speculation suggests the Indian price may be settled at $280/t CFR and the Chinese contract price perhaps a few dollars lower at $270-275/t.
Some sales into South East Asia took place and slight price reductions were seen, giving other markets hope that they will also be able to secure even lower prices in the coming weeks. The Brazil market was quiet with no movement on price and moderate volumes being sold.
The South African price remained unchanged at around $330/t CFR.
General Market Outlook
Crude Oil prices raised by various geo-political concerns
Brent Crude Oil was sharply up this week as reduced US oil inventories, the Israel-Hezbollah situation and also elections in the UK and France created a lot of risk sensitivity that pushed the oil price up. Brent crude hit its highest prices in 4 months, gaining more than a dollar to hit $87.5/bbl on Friday.
Gas prices on the other hand reflected the declining seasonal demand as the Northern Hemisphere has not yet moved into peak summer cooling requirement. The European TTF gas prices retracted by a couple of percent to $10.4/MMBtu. In the USA the Henry Hub benchmark declined to $2.3-2.4/MMBtu.
The Rand continues to enjoy some relative strength on the back of a positive perception from international markets of our recent national election. The Rand returned to R18.20 this week, which helped with import parity values of the various agricultural inputs including fuel (plus fertilizers and chemicals of course).
The broad trend in international grain prices was negative once again this week, as USDA news shows that US planting is well on schedule and big planted acreages are expected. If we look back over the month of June, the CME prices for maize and wheat both fell by over 10%. The lower SA harvest has given local maize, soya and sunflower prices some support but all of these crops have declined over the past 4-5 weeks.
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