Nitrogen
Yet another Indian Urea tender emerges, driving prices upwards
The urea market remains buoyant and seemingly in the middle of a strong upswing in prices. The Indians closed out the latest tender by fixing only 560,000t, which was the total volume that suppliers were prepared to sell at the tender price of $389/t delivered. The Indians ideally wanted more than 1 million tons, so the market is rife with talk of the next Indian tender being issued as early as next week. The Indians will be keen to conclude this before the major Diwali holiday which starts at the end of the month. They will likely be seeking anything from 1-1.5 million tons of urea, for delivery by the end of the year. Suppliers have already started taking positions in anticipation of this tender and this has boosted urea prices substantially this week.
Middle East producers have been able to make the most of the current demand and have lifted prices this week. The Middle East price rose 7% and is trading at $390/t FOB at the top end.
Iran, which usually trades at a $30/t discount to the Middle East because of its sanctioned status, has been lagging and is struggling to achieve much above $320/t FOB – compared to around $350-360/t which is where the equilibrium value would be. This indicates the lack of demand from other markets, primarily Brazil, that are prepared to buy sanctioned cargoes.
The Brazilian price did edge up a few dollars this week but the differential between Brazil and the Middle East price doesn’t cover the cost of transport – again indicating that Brazil is able to source urea from cheaper origins such as Iran. Nigeria also sold some cargoes to Brazil at a lower netback than the Middle East value.
Ethiopia has been tendering for 250,000t of urea for some time – this tender was concluded in the past week at a reported $340 FOB (presumably FOB Middle East basis), which is a great price in today’s market. It is unlikely that any of the non-sanctioned suppliers such as the Middle East or Egypt will supply at those values, so it is probably Iranian tonnage that will go to Ethiopia.
Interestingly the US urea price actually declined this week - mostly due to the lack of trading activity and low demand, plus the hangover from the recent hurricane issues in the Gulf of Mexico delaying shipments. It is likely that as we proceed deeper into Q4 and the Americans accelerate their winter stocking programme that prices will align with international trends.
This week brought rain to much of the East and central regions of South Africa, so this should prompt some pre-planting or even planting activity and hopefully get fertilizer moving inland from the ports, where suppliers are all sitting on high stock levels. Zimbabwe and Zambia also had their first proper rains of the season this week.
Ammonium sulphate prices surprised this week by registering small declines. This was caused by Brazil stepping away from the market and leaving Chinese producers chasing business. Brazil has a large lineup of amsul cargoes scheduled for October, which led to the slowdown in trading this week. It is unlikely that amsul will buck the upward price trend being driven by urea for too long.
Ammonium Nitrate prices remain flat as demand is lacking. The withdrawal in Brazilian buying seen in amsul spilled over into the nitrates space too. In Europe Yara has tried to push through an increase on AN and CAN on the grounds that ammonia prices are pretty high and their cost position obliges them to lift the price. Needless to say, this was met by a total absence in buying interest.
Ammonia markets were steady this week, with the only price change being seen in the Middle East, where the price rose by $5/t to $420/t FOB. Asian ammonia prices remain in the mid-$400s while prices in Europe and North America are closer to $600/t.
Phosphates
Phosphates prices mostly unchanged, although activity picks up in the US
Trading in the phosphates space was led by US activity this week, as much of the American phosphates capacity remains idled after being closed as a precaution ahead of last week’s major hurricane that hit Florida. The perceived shortage of phosphates in the US market prompted a lot of trading activity and saw DAP prices rising in that region. The US market is awaiting an update from Mosaic around the impact to production at its Florida operations post Hurricane Milton.
Indian trading in phosphates was much slower this week, with just one cargo being bought. The Indians remains hungry for more phosphates but the current price is limiting purchases.
There is talk that China is looking to restrict its exports of phosphates for the remainder of the year in order to preserve supply to its domestic market. This will support higher phosphates prices as the market is tightly balanced.
MAP markets remain especially tight and the only thing keeping prices in check is the lack of demand due to increasingly unfavourable crop economics in the major planting regions. Brazil is not only grappling with the affordability issue but there are also signs of a possible drought in the upcoming summer planting season there. Despite the relative slowdown in Brazilian buying, the import lineup shows that over 600,000t of MAP has been booked for October, versus less than 500.000t in October last year.
Ethiopia is attempting to source around 1.25 million tons of phosphates in various forms, which will create further tightness if they are indeed able to procure that sort of volume.
Potash
Potash prices flat across all benchmarks this week
Prices were stable across most of the major regions this week, as the general mood suggested that potash prices have probably hit the floor for this year. As always, producers are optimistically trying to talk the price up and there is no sign of any strong fundamentals emerging just yet that might support a price increase. But for now, producers seem to be happy if prices stop falling. There are some potash tenders taking place in South East Asia, which should consume some of the tons floating around but no major surprises are expected in terms of pricing.
Prices in South Africa remain unchanged but the recent rains and the expectation of further rain in the coming week has boosted sellers’ hopes of potash sales picking up out of Durban.
General Market Outlook
Weaker demand outlook for Crude Oil pushes prices down
Brent Crude oil continued its see-saw trend this week, as projections from both OPEC and the International Energy Agency pointed towards lower demand next year and this sent prices tumbling back down into the low $70s per barrel. Crude oil is presently trading at $74.1/bbl, down around $5/bbl on a week ago.
The European TTF gas price continues to hover around $12.5/MMBtu, while US natural gas prices have shed a good 15% to fall to $2.3/MMBtu after the latest hurricane.
The US harvest is well underway and so far is showing above average yields for both maize and soya, plus the harvest is ahead of schedule. This data is pushing maize and soya prices down, as would be expected. CME prices for maize, soya and wheat were down 2.5-3% on the week. This weighed on Safex values and all the local prices were down this week too, with the exception of sunflower which just about managed to achieve an increase. The Rand lost almost 1% to the Dollar, so the weaker Rand may support stronger Safex prices in the week ahead as the lag plays out.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
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