Nitrogen
Unless strong demand emerges soon, Urea prices look likely to soften during the next month
Urea producers claim to be comfortable for now in terms of sales after the recent round of tenders. However demand remains weak, despite crop prices showing a small upturn this week. Unless solid demand emerges in the coming weeks, urea prices look set to decline during August. Beyond that, the outlook remains positive with prices expected to rise steadily from September through to the end of the year as Northern Hemisphere seasonal buying picks up.
Brazil is adequately supplied for the short term, so buyers there are playing a waiting game to see if they can push prices lower and take advantage. Likewise Southern Africa and Australia have bought fair volumes in the past month, so their early season needs appears to be catered for – these markets will have the same mindset as the Brazilians, to wait and see if more attractive prices appear in the coming weeks.
European late season demand is now more or less done for their season, which means the production challenges faced by Egyptian producers over the past month will not have any impact on the supply-demand balance around the Mediterranean.
Pakistan has a medium-sized tender closing in the next few days, which will give some insight into how anxious producers are for sales if we see competitive pricing. There are talks of the next Indian tender being placed in middle or late August – which if it happens, should support prices for September. The issue for the market is what happens during August as demand looks very thin.
Another flag supporting market weakness is activity in Iran. They cancelled a sales tender this week as the highest bids were below $285/t FOB Iran. The Iranians are now trying to sell around 200,000t at a target price of $300/t, which is still a discount versus Middle East and other Asian supply, yet they are struggling to find any takers.
The Middle East price was stable in the low $340s this week on the back of minimal trading activity. Producers are busy fulfilling sales made over the past month but will need to be finding new business within a week or 2 otherwise inventories will start approaching uncomfortable levels.
The Rand weakening by around 0.5% played through into our import parity costing for urea rising by an equivalent amount.
Ammonium sulphate prices are lower again this week, particularly for crystalline grade. Traders have been discounting prices to try and create some sales momentum but the general mood is that there is no rush to buy if nitrogen values are not going up any time soon and the gloomy mood around crop economics, particularly in Brazil, continues to keep prices under pressure. Amsul traders are trying to create some optimism with expectations of Brazil needing to start its buying for the upcoming summer season. Brazil already has over 700,000t booked for the month of July.
Ammonium Nitrate producers continue to focus on South America for demand. Brazil remains cautious about AN purchasing given concern over crop economics but market analysts there anticipate Brazilian buying of nitrates to pick up during the coming month. A number of CAN cargoes are en route to South Africa, due to arrive in the next month or 2 – some AN cargoes are also destined for the neighboring markets via the East African ports.
Ammonia prices remain stable, although the market is tightening in the West due to Trinidad’s production challenges on the back of limited gas supply. The Tampa fortnightly contract price was announced at $60/t up, at just below $500/t CFR – all other benchmarks were unchanged.
Phosphates
Demand for Phosphates is strong and further price increases seem inevitable
Phosphate prices remain buoyant despite India remaining on the sidelines in terms of trade. Indian phosphates stocks are now very low by historical standards and all the phosphate traders are preparing to engage with the Indians when they return to the market, as they must in the next month or two. Indian DAP imports for the first half of 2024 are more than 50% lower than the same period last year, which indicates the scale of the likely phosphates deficit in India.
Substantial purchasing from Pakistan and South East Asia supported a $10/t increase in Chinese export prices – the Chinese price is now just below $600/t FOB for DAP. Demand in North America and Europe has quietened down mostly, as the application seasons are complete, and prices are unchanged this week.
MAP prices in Brazil remain in the $630-640/t CFR range, which is setting a reference price for traders offering MAP into the Southern African markets. Supply remains very tight and local buyers have been slow to commit, making phosphate availability for the upcoming season a real concern.
Ma’aden reportedly sold over 100,000t of MAP to Brazil this week, which translated to a netback price of just over $610/t FOB Saudi, a $20/t increase. This has pushed our import parity costing up by around 4%, once the weaker Rand is factored in.
Foskor announced its August list price for MAP R12,436/t bulk ex-Richards Bay, in line with developments in the import parity value of MAP. How much product Foskor has available is a concern as they have been making enquiries for cargoes of MAP, which suggests that they foresee a shortage in the local market, whether due to their own lack of production or simply because imports of MAP to date are lower than the market requires.
Potash
The effects of lower Indian and Chinese contract prices are felt in Brazil and other markets
The conclusion of annual potash contract prices in India and China have begun to flow through other major markets. Brazil saw a few dollars reduced from its price as importers start to push for similar prices to those achieved in the big Asian markets. Brazil is still above $300/t, so there would appear to be scope for a decrease of $10-15/t once the premium for granular versus crystalline product is factored in.
This week saw a number of the major potash producers and exporters move to lock in big contract volumes with India and China for the remainder of the year. Traded volumes have been slower than normal as these importers have awaited confirmation of an official price and now that this price is in place, producers are anxious to shift large volumes as soon as possible.
This week brought a further $5/t decline in low end of the South African price range – the latest potash price is now $325/t CFR. Once the effect of the annual potash prices have been absorbed by the various major regional benchmarks, we expect some price stability and producers will be targeting some price increases from Q4.
General Market Outlook
Weaker Rand and lowered US crop outlook boosts crop values locally and abroad
Brent Crude Oil fell sharply this week on news of lower than expected Chinese oil imports. This news pushed oil prices to below $81/bbl midweek. In the last day or two, positive economic news from the US has boosted oil prices again as increased demand is expected - Brent crude is currently trading at $82/bbl.
The European TTF gas price remains around the $10/MMBtu mark. USA natural gas has rebounded sharply as gas consumption for electricity generation hit record levels thanks to a widespread heatwave in the US over the past week. The Henry Hub price touched on $2.3/MMBtu at the start of the week before easing off towards the $2/MMBtu level.
The USDA announced a small decline in crop planting and growing conditions in the US this week, which boosted CME prices for cereals and oilseeds this week. The stronger Rand and smaller harvest in SA helped local Safex prices rise strongly this week, with most of the major crops seeing a 3-4% increase.
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