Nitrogen
Urea market is soft as the Indian tender puts downward pressure on prices
The Indian urea tender closes for offers early next week and thereafter the price will be published. A price of close to $340/t CFR India is being talked about, which would equate to around $320/t for the Middle East. This is $10-15/t lower than the current price level.
The big Northern Hemisphere markets are quiet right now as the season is largely over and buyers seem happy to play the waiting game around refill programmes, especially as crop prices are not very positive.
Brazil continues to wrestle with the economic conundrum of needing to keep fertilizer imports moving because summer planting is just around the corner, yet crop economics are even less appealing this week after cereals and oilseeds prices were even lower this week.
Egypt has been trying to target a urea price of $350/t but getting no takers and most sellers there would probably accept $340/t if there was a buyer prepared to make the offer. Prices are also trending down out of Iran, where producers are trying to sell at $300/t and battling to find much interest.
Chinese urea exports remain on pause and while there has been talk of resuming exports, the Indian tender is usually something that the Chinese authorities try to steer clear of. Significant Chinese exports are thus unlikely in the short term, especially if price trend lower as is currently happening.
We are probably reaching the very end of the mid-year lull in demand right now. We expect that once the Indian tender is wrapped up and assuming they contract a large volume, the urea market should start to tighten up. History indicates that once the urea price starts to rise at this time of year, more and more buyers start to jump on the bandwagon and try to buy before the market gets too hot. This is self-fulfilling and drives prices ever higher as we move towards December.
Ammonium sulphate prices firmed up moderately this week due to increased buying from Brazil. The present price-sensitivity of the Brazilians will limit how much upside there is to amsul pricing – the outcome of the Indian urea tender will be key to setting the ceiling price for nitrogen products. Expectations are that Brazil needs to secure a further 2 million tons of amsul to meet its summer planting needs.
Ammonium Nitrate prices were flat this week – European producers and distributors lifted their AN and CAN list prices this week as a response to higher natural gas, and thus production costs, over the past month, but there were no takers for nitrates at these elevated numbers.
Ammonia prices were stable this week with no major deals being done. The Tampa fortnightly contract price is due out shortly but otherwise the status quo remains in the various markets. In general supply remains quite tight but demand is also weak and the combination is leaving the market relatively balanced for now.
Phosphates
OCP secures major sales of DAP and TSP to India this week, lifting prices of Phosphates once again
OCP of Morocco concluded a sale of over 500,000t DAP and 200,000t TSP in a phosphates package deal totaling almost 800,000t to India. This lifted the Indian benchmark DAP price up by a few dollars. It was the TSP component of the transaction that surprised most as India is not usually a major TSP player and TSP prices are seldom attractive on a cost per unit phosphate basis compared to MAP and DAP. The Moroccans discounted the TSP price to seal the deal and other phosphates buyers will be following this with interest in case there is an opportunity to substitute to TSP to replace hard-to-find ammonium phosphates.
Chinese phosphates continue to flow although there are signs of the Chinese limiting volumes somewhat. This has helped push the Chinese export DAP price up by around $15/t. China’s domestic autumn season is approaching and the authorities will want to ensure availability of nutrients for the domestic sector ahead of exports.
With crop prices declining again this week, the affordability question around nutrients continues to circulate. There are growing concerns that crop economics are now at the point where demand destruction for phosphates and potash are an issue – and with phosphates being double the cost of potash at present, it is phosphates demand that is likely to be impacted most severely.
Brazil has fixed over 1 million tons of MAP for import during August. Retail sales remain subdued as farmers are grappling with affordability issues.
It seems that phosphates prices will remain elevated in the short term but with nitrogen and potassium prices under pressure and crop prices also struggling, the end of the current price rise for phosphates cannot be that far away.
Potash
Potash prices remain soft, although a Canadian rail strike could disrupt global supply
Brazil saw a small reduction in its potash price this week as buyers press for price levels in line with the Indian and Chinese contract prices.
In other news, there is a threat of a rails trike in Canada that would bring the majority of Canadian potash exports to a halt. With Canada supplying about 30% of global potash volumes, this has the potential to impact global trade. If the disruption was sustained for an extended period, this could cause prices to rise if demand cannot be met. At this stage, it would be premature to suggest such an outcome.
With potash seemingly so oversupplied, a number of potash importers are currently holding tenders in the hope of achieving even lower numbers than the $275-280/t seen in some markets. Once Q4 demand starts to improve in line with the Northern Hemisphere stocking season, we expect potash prices to stabilize and maybe even firm up. But for the next month or so, potash prices are not expected to change much.
General Market Outlook
Poor US economic outlook hurts commodity prices across the globe
Brent Crude oil prices fell abruptly this week, dropping to $76/bbl midweek. Brent has recovered to almost $78/bbl but remains weak by recent standards. US economic data is increasingly pointing to a ‘hard landing’ where the economy is busy shrinking and this is lowering oil demand and pushing the oil price down.
The European TTF gas price continues to float in the $12-13/MMBtu range as the market prices in risk of Russian supply disruption to Europe. The weaker economic outlook in the US pushed the Henry Hub natural gas down to $2.0/MMBtu.
This week brought another round of disappoint price developments in the crop sector. International maize and soya prices were down 1% on the week and the CME wheat price was almost 3.5% lower on a dollar basis. The weak international price environment is starting to impact local Safex prices and only white maize showed any upward progress this week.
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