Nitrogen
Confirmation of big Indian tender urea volumes has tightened the market and is supporting firmer prices
The Indian urea tender has confirmed over 1.1 million tons of product, which has taken up most of the surplus volumes from Russia, the Middle East and also Malaysia. This has put producers in a stronger position to hold out for higher prices going forward. With Northern Hemisphere demand kicking in, expect urea prices to keep rising.
The Middle East sold around half a million tons to India, which is at least a month’s worth of spot availability – meaning that the Middle East producers have allocated all their output into at least mid-October and will thus be able to pick and choose their trades for the next few weeks. Implying that they will be pushing for higher prices with little pressure to discount. The Middle East price has risen into the low $330s and seems set to rise for the coming months.
The Chinese remain absent from the international market, opting to focus on domestic deliveries, and the North African producers are holding back in the hope of supplying Europe and North America when those buyers commence their Q4 sourcing programmes. This leaves the Middle East and the Russians as the main participants in the Indian tender. Volume expectations are for between 500-800,000t being fixed by the Indians, and this could go as high as a million tons should the offers allow. Indian domestic consumption of urea has been high in the past month as monsoon rains have been above average and farming conditions are very positive.
Egypt has been quick to seize on firmer market conditions and has been able to push its price up from the $330s up to $360/t FOB this week. What kind of volumes they’re able to sell at these prices will be a question.
With higher Middle East prices (and everywhere else), Brazil has been paying more for urea. It is peak demand for the Brazilian summer rainfall season but with crop prices still low, Brazil has not been buying any more than it has to. Brazilian importers seem to be adequately covered for now, so Brazil is not expected to add much support for higher urea prices. The other South American countries are similarly in peak season and a fair number of urea cargoes are going into those markets.
China remains absent from the urea market, despite falling domestic prices as demand in-country has declined. Should international prices continue to rise, the Chinese may be tempted to take advantage of better netbacks. The Chinese resuming urea exports could slow down the price rise – at this stage, expectations are that the Chinese will not be exporting any meaningful volumes for the rest of the year.
Iran has been pushed into taking lower prices after the Indian tender – Iranian deals have been done in the low $290s FOB, which is more than the usual discount against the Middle East price. With the urea market tightening, the Iranians should be able to follow the market upwards.
The strengthening of nitrogen prices was expected to lift Ammonium sulphate prices but so far prices have been flat. It appears that resistance from the bigger markets like Brazil has kept prices in check. It seems probable that amsul price will start to firm as demand in general picks up in Q4.
Ammonium Nitrate markets are suffering from a general lack of demand – the European summer demand is now over and it’s still a bit early for the Q4 stocking programme to commence.
The Ammonia market has firmed, mostly in the East where the Middle East price has risen into the low $400s. The firming urea market will add some support to ammonia prices, although ammonia does appear to still be out of line with urea. Ammonia prices in Europe are now pushing $600/t CFR, which is going to challenge the viability of producing nitrogen-containing fertilizers in that region.
Phosphates
MAP and DAP prices remain flat as buyer resistance to high prices becomes stronger
India has been doing its best to meet its phosphates needs with aggressive buying through both spot transactions and tenders. The outcomes of these initiatives are not fully clear yet as the Indians are steadfastly refusing to consider higher prices. This is quickly approaching a stand-off where sellers are limiting availability unless they get higher prices and buyers cannot or will not consider paying more. Unless the Indian government increases the phosphate subsidy (which it understandably is not keen to do), it is difficult to see prices for DAP rising much above current levels, irrespective of the supply-demand balance.
Other big phosphate tenders in Asia and Africa (Ethiopia) received limited interest and did not cover the volumes being sought. These countries are looking to retender and also considering alternative phosphate products such as NPS.
MAP prices continue to be flat as the Brazilian price has been unchanged for more than 2 months. Despite the flat price, Brazil imported record tonnage for August, indicating that some demand still exists.
The phosphate situation is a puzzling one. While MAP is genuinely quite tight, there is no fundamental why DAP should be in short supply. The Moroccans appear to be operating well below capacity, which is strange considering that price levels are very appealing. Demand destruction is a real concern now – looking at the chart above, it is clear that phosphate values are way out of line with the nutrients, which is abnormal. We expect some sort of correction in the coming 3-6 months – most likely in the form of phosphate prices declining, but there is also the potential for nitrogen in particular to rise and narrow the gap.
Potash
Potash markets remain very flat as downward price pressure builds
The handful of potash tenders surprisingly generated prices above where the market is believed to be – resulting in the tenders being scrapped and buyers looking to negotiate for lower values. Indications are that this should be a successful tactic as producers are battling to find new business. Potash prices into the major markets now appear to be tending towards $280/t.
Brazilian prices remain just below $300/t CFR officially but there is a lot of talk of deals being done at closer to $280/t, especially for sanctioned product. August imports to Brazil were lower than the prior year, indicating weaker demand and ample stocks already in the country.
The South African import price for granular potash has declined for the 2nd week running and is now below $320/t CFR. Farm demand remains minimal and importers have substantial stocks, thus are keen to encourage some early buying.
General Market Outlook
Oil prices dip sharply as fears of economic recession rise
Brent Crude oil has plummeted sharply recently, dropping below $70/bbl for a short period this week. It is presently trading at $72.5/bbl. Forecasts for oil are being downgraded as recessionary fears in a number of major economies are outweighing any geopolitical concerns around the Middle East.
European TTF gas prices remain just above $12/MMBtu but the much lower oil price outlook may help lower this. US gas prices have returned to $2.3/MMBtu despite the gloomy outlook for the US economy.
The Rand has managed to remain below R18 to the Dollar for a number of weeks now, which has been good news for the costing of imported agricultural inputs, which are being imported now.
Local grain prices, especially maize, have continued to strengthen despite the Rand appreciating against the Dollar. Both white and yellow maize are at annual highs. International prices for maize, soya and wheat have bounced around a bit in recent weeks but are slightly up over the past month or so.
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