Nitrogen
Indian tender pushes Urea prices down as large volumes are expected to be secured
The narrative being punted by various urea players of prices rising due to the latest Indian tender was proved false as prices have dropped this week. Urea supply-demand fundamentals point to a very oversupplied market. The Indian tender will likely commit a lot of the surplus product presently available and should tighten the market a little. We expect that prices will soften for the next week or two and thereafter firm steadily for the remainder of the year.
The tender has a relatively long shipment window to the end of October, compared to the more usual 4-6 weeks provided. This has raised expectations of a large volume of urea being secured under the tender because of the degree of time flexibility for participants to make delivery within the stipulated period. The more product the tender removes from the market, the greater the likelihood of higher prices to come as Q4 seasonal demand starts to kick in.
With the Chinese remaining absent from the market, the Russian and Middle East producers are expected to be the leading suppliers. The Middle East urea price declined by $5/t and sits at just above $330/t fob. The Russian Black Sea benchmark price fell almost $10/t for similar reasons.
Somewhat illogically, the Brazil price actually rose this week to over $360/t CFR – this was ascribed to traders trying to argue that prompt product availability will be limited due to the tender and hoping that Brazilian buyers would be tempted as they are into their main sourcing window for the summer season. This is patently not true and the Brazilian price will react rapidly to align with whatever price emerges from the tender.
The Rand showed strength against the Dollar late in the week and the combination of the exchange rate and a small reduction in the Middle East urea price pushed our urea import parity costing down by more than 2% to just over R7,100/t
Ammonium sulphate prices rose around $5/t across both grades as the market is apparently poised to climb. The reasoning for higher amsul prices is being given as strong Brazilian demand and a number of Chinese production facilities going down for maintenance. It is somewhat unusual for amsul to move in an opposite direction to urea but the next few weeks will tell whether nitrogen products are firming or not.
Ammonium Nitrate prices gained a few dollars too as impending Brazilian is encouraging producers and traders into optimism. Apart from Brazil – and Brazilian demand strength remains an open question considering the further decline in crop production economics – there are very few drivers that support higher nitrates prices. As with sulphates, the urea price direction will dictate overall direction in the coming few weeks.
Ammonia prices declined $15/t in the Asian markets, opening the opportunity for sales from the East to the West. Because of the cost of freight for ammonia vessels, trade between the east and West is relatively unusual but the cost differential is now sufficient to justify such sales. The Middle East price is presently in the low to mid $330s compared to over $560/t in Europe.
Phosphates
Phosphates market remain tight with Indian paying $30/t more for DAP this week
India remains under severe pressure to procure phosphates as domestic demand is strong and stocks are low. This resulted in India paying $30/t more this week for DAP as limited sources of supply mean the Indians are paying up to $620/t CFR. Most other benchmark locations are unchanged this week but the theme in all regions is that supply is tight.
Phosphate prices in the US were slightly lower as the combination of low demand and poor crop economics are slowing the ‘refill’ programme that takes places in the USA at this time of year.
Brazil reported increased sales activity around MAP this week, although buyers are unhappy with current prices of $635-640/t CFR and refer to the now very unfavourable crop economics, especially for soya.
There is talk that the Chinese government is going to formally restrict sales of phosphates to India. It is not clear why the Chinese government would take this step but it appears that they are concerned about the Indians buying so much phosphate that the Chinese autumn season could be adversely affected.
Potash
Potash prices were flat this week as the market is very quiet again
Some potash volumes are starting to pick up now that the big annual contracts have been settled but overall volumes are lower than normal and producers are struggling to drum up business. The Brazilian prices was unchanged this week but the general mood is that potash needs to fall in Brazil before buying will really increase.
The stronger Rand helped push the import parity price of potash into Durban down to a 2 year low at R6,350/t ex-warehouse basis.
General Market Outlook
Oil prices remain somewhat soft and local grains prices remain high due to the low harvest
Brent Crude firmed up during the week and was quite volatile – at one point it rose above $82/bbl but retreated to close the week back in the $79/bbl range where it had started. It seems political sentiment was the main driver of this volatility, with the latest round of talks of a possible ceasefire in Gaza pushing the oil price down.
The European TTF gas price remain elevated at close to $13/MMBtu as Ukraine continues to make headway into Russian territory and escalate concerns of disruptions to Russian gas-flows west to Europe. The American natural gas seems to be the only stable commodity index as it is holding steady at $2.1/MMBtu.
International crop prices continue to trend downwards as America plantings look good and general economic outlook for most of the globe does not look too strong. Despite the strong Rand, which closed the week below R18:$, the extent of the drought impacting on yields in the current harvest are pushing Safex prices up.
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