Nitrogen
India tender secures way lower volumes than expected
The dust is busy settling on the latest Indian Urea tender and traders are trying to plot their way forwards as the Northern Hemisphere buying season approaches. The Indian tender achieved a price of just above $350/t CFR India but only secured around 430,000t out of the 2.7 million tons that were offered. This means that there is a fair amount of urea stock now available and prices have eased off this week. There remains a huge amount of chatter in the market about how urea prices are going to run up – but the fundamentals simply do not support this argument at this stage.
We remain of the view that we will see a small downward move in prices over the coming weeks, and then prices are likely to start moving up as September approaches and the Q4 demand really starts to kick in.
The Egyptian producers continue to have gas supply disruptions affecting their production continuity but overall, there is no meaningful impact on their output. The South East Asian producers have also experienced some production hiccups and have been doing their best not to concede to lower prices. This has left a bit of a gap for the Middle Eastern producers who have channeled some of their product that was unsold on the Indian tender in that direction.
Some medium-sized tenders in Pakistan and Ethiopia have also taken place but these have been absorbing sanctioned product from Russia and Iran, and not really moved prices in the main benchmark locations. The Iranian price has dropped below $300/t FOB and this may be the clearest flag that the urea market is long and demand is on the weaker side right now.
The Middle East price lost a few dollars at the top end of the range and is trading at just above $340/t FOB. This is about $10/t down on where it was at the beginning of July.
The Brazilian price has been unchanged at $360/t CFR with the weaker crop prices being blamed for lack of buying from Brazil. Import volumes for July are in line with historical volumes for this time of year. Interestingly, a lot of sanctioned product has been booked, which indicates the price sensitivity of Brazilian buyers and is also leaving some of Brazil’s traditional suppliers with unsold product. This reinforces our view of prices dropping in the coming weeks.
China remains largely absent from the international urea market as the government intervenes to make exports more difficult. The Chinese domestic price has been falling as local seasonal demand is over and producers have no where to direct their sales.
Ammonium sulphate prices have continued to slide downwards, in line with our views of weakening nitrogen values across the board. Enquiries from South East Asia and Brazil have diminished, leaving Chinese producers in particular with rising inventories and some pressure to chase sales. Lower crop prices are the main reason given for lack of demand for amsul.
Ammonium Nitrate markets are subdued as the Europeans are focusing more on the upcoming harvest and nitrogen demand for top-dressing is now over. Brazilian lack of appetite for nitrogen in general applies to nitrates too. Fert-grade AN is priced at around $230/t FOB Baltic and CAN in Europe is stable at €275/t.
Ammonia prices were flat this week, although supply (availability) seems to be tight in both the east and west. Trinidad, which is a major exporter to North America and Europe, has been battling with gas supply issues that have limited ammonia production. In terms of pricing, ammonia is trading at just below $500/t CFR into Europe and is $50-80/t cheaper in North America. In the Asian market, the Middle East fob price is $350/t and the Far East delivered price is just over $400/t.
Phosphates
Phosphates prices seem to have plateaued for now
Underlying demand for phosphates appears to be strong still, however the run up in prices have increased affordability concerns and caused buyers to hold back on over-committing on volumes.
Some big phosphate tenders into some Asian markets, such as Pakistan, have seen DAP prices rise into the $620+ range, as shortage of product forces buyers to accept these numbers. The Indian DAP price has been stable at $550/t CFR but it appears inevitable that the Indians will be obliged to pay higher numbers in the coming weeks.
Adding to the likelihood of higher prices is the tightening of export availability from China. Domestic phosphate prices have been rising and this may encourage the Chinese government to restrict exports in an attempt to direct product towards its domestic market and push prices lower.
The Brazilian MAP price is holding steady at $635/t CFR but declining crop prices are impacting Brazilian demand for phosphates and causing buyers to resist these prices. The limited availability of MAP may force buyers to accept these prices but there is clear opposition to present price levels and it seems unlikely that MAP prices can rise much further in the short term. In most markets, MAP is trading at a $70-100/t premium over DAP, so substitution towards DAP is starting to happen.
Of relevance to local liquid fertilizer users, the Indian quarterly phos acid contract price for Q3 remains almost unchanged at $950/t – the Q2 price was $948/t. In theory the stronger Rand should be helping the costing of local phos acid.
Foskor has continued to be reactive to market developments and has updated its list price for MAP for the 2nd half of July to R12,000/t bulk ex-Richards Bay. This is very much in line with current import parity.
Potash
Annual Potash contracts to India and China finally settled
The Indian annual potash contract price has eventually been settled at $279/t CFR (note that the contract refers to standard/crystalline grade). The Chinese did a little better and agreed their annual potash price at $273/t CFR. These prices were broadly in line with market expectations. Producers are now hoping that clarity on these prices frees up buyers in markets to buy with confidence knowing where the floor price is.
South East Asian prices responded to these developments and prices at the top end of the range dropped by $20/t to align with the Indian price. Somewhat surprisingly, the Brazilian prices remains unchanged at above $300/t but a downward adjustment is likely in the coming weeks, especially as major potash-consuming crops like soya have seen values falling in recent weeks.
The South African price edged downwards by a few Dollars to $327.5/t CFR.
General Market Outlook
Energy prices stable as outlook for international crop prices worsens
Brent Crude Oil has trended down over the past couple of weeks from the high $80s per barrel. This week saw crude oil briefly drop below $84/bbl before returning to $85/bbl where it started the week.
Gas prices have also been stable with the European TTF gas prices holding at just above $10/MMBtu. USA natural gas prices have subsided significantly, dropping below $2/MMBtu yesterday and now trading at just above $2/MMBtu.
The Rand opened the week at just below R18 but has steadily weakened against the Dollar as the week has gone on. It is currently trading at R18.35 to the Dollar.
International grain values continue to struggle with serious declines seen across all the major grains and oilseeds. The CME maize price dropped below the significant $4/bushel level this week – international maize has fallen by 15% in the last month. Likewise, CME wheat has declined by a similar 14%. The much lower harvest in SA has really supported Safex prices and maize has hit highs for the year despite the strong Rand.
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