Nitrogen
Delayed Indian Urea tender causes price sentiment to weaken
Sentiment in the urea market has seemingly swung from positive to negative this week – this has bene led by the delay in the issuance of the latest Indian urea tender. This next tender was expected this week with the major Indian Diwali holiday commencing next week. This means that the tender will not materialize until the first week of November at best. None of this appears to be a show-stopper for the market and the Indians are probably sensible in letting the urea market cool off and hopefully attract lower pricing. The market however has interpreted the delay as a big enough factor to completely reverse the recent surge in prices.
In terms of actual market fundamentals, the Indians still need to buy urea and a tender will take place in the 1st half of November. The Americans need to continue with their winter restocking. The Europeans do need some nitrogen, although they are grappling with the dilemma of expensive locally-produced nitrates (expensive from a cost perspective because natural gas feedstock prices remain high) versus buying imported urea, which has been rising too.
The Middle East urea price remained stable this week as producers are comfortable after recent sales and tender awards and are happy to bide their time waiting for the next Indian tender. Brazil and other Southern Hemisphere markets are looking a little weaker in terms of demand but North America and Asian off-take should provide adequate demand for Middle Eastern output over the coming months.
Brazil saw prices drop off a few dollars this week, primarily because of weak demand in the local market. Numerous cargoes have been booked in recent months and the import lineup is looking healthy – so there is little pressure on Brazilian buyers to consider higher prices.
European demand for urea remains on the weaker side, as late season rains have hampered both the harvesting of crops and the planting on winter crops. Slow European buying has pressured the Egyptian price back down below $400/t – which is very much in line with Middle Eastern pricing and may bring the Egyptians into the reckoning for the next Indian tender if prices remain at current levels for a few weeks.
American buying has been slow again this week, apparently driven by hopes of prices coming down. There is still ample time ahead of the US spring to source urea, thus buyers aren’t under time pressure, although the Mississippi River system will start to close various sections as winter sets in.
Where to for urea prices? Our feeling is that we will see a pause for a week or two as the market awaits the next Indian tender and we may see prices even fall a few dollars as shrewd buyers take the opportunity to secure the odd cargo. But in general, we are entering the peak demand period of the year, which translates to price support. We thus expect urea to remain in the high $300s and possibly test the $400 level if/when India places its next tender.
Ammonium sulphate prices continue to trend downwards as lack of demand frustrates producers and traders who have ample stocks. Brazil is well-covered with inbound cargoes and buyers are content to negotiate hard on price and see what discounts can be had. A small flag to watch on amsul pricing is rising demand from Europe, where local nitrogen production costs are high, and amsul is being seen as a substitute to urea and nitrates and the local market is short of product. It is unlikely that the scale of European demand is sufficient to really boost amsul prices but it could provide some support.
Ammonium Nitrate prices are stable to slightly declining. Europeans suppliers continue to try and raise prices in an effort to recover some of their high production costs but demand is scarce and the actual market prices being achieved seem lower if anything. Brazil is also being blamed for lack of buying interest, although trade data shows that Brazilian buying is very much in line with historical demand.
Ammonia prices were unchanged this week and the ammonia market overall is assessed as being quite balanced. With urea prices flattening out and the other nitrogen products all in decline, it is difficult for ammonia producers to justify higher pricing short of their being a major production outage.
Phosphates
Phosphates markets starting to cool as Indian buying slows
US traders continue to buy DAP and drive prices in that region higher. The announcement of a force majeure by Mosaic at its Florida phosphates operations following the recent hurricane strike in the region has added to US trading activity. Speculation on lost volumes indicates that around 250,000t of production may be lost, which is easily compensated with imports ahead of next spring in the US.
As the end of the Indian season approaches, traders have been starting to offer small discounts to chase phosphate sales. The Indian price has thus declined very slightly. Indian demand is also slowing and this is likely to slow further as the kharif (monsoon) season comes to its close by the end of November.
MAP prices rolled over once again this week as trading activity is limited, especially for spot cargoes. Brazil is adequately supplied with phosphates and demand remains on the weaker side due to marginal crop production economics.
The outlook for phosphates is for prices to gradually weaken towards the end of the year, although large reductions are not expected.
The Indian phos acid contract price for Q4 has still not been finalized – indications are that the price will be up on the Q3 value of $950/t CFR India. Suggestions are that a price of $1,080-1,125/t could be realized.
Potash
Potash markets stable again this week
Potash prices were unchanged once again this week – the Brazilian price has been flat for 3 weeks now and traders are using this to argue that prices have probably found a floor and lower prices are unlikely. This argument hasn’t found much support from buyers and with demand generally weak all over, prices remain stuck at current levels either side of the $300/t band, depending on market size.
Some South East Asian tenders closed this week, yielding prices in the $300-320/t CFR range.
The South African price ticked down a few dollars this week, especially for bigger transactions. Potash is widely available around the $310-315/t CFR level in Durban.
General Market Outlook
Prospects of a Middle East ceasefire stabilises Crude Oil
Brent Crude oil remains very much in the headlines and geo-political developments keep prices moving. The latest news is that the prospect of a ceasefire between Israel and its opponents is causing oil prices to settle just below $75/bbl. This week saw prices peak over $76/bbl after subsiding as low as $73/bbl. Some political commentators are considering whether Israel will attack Iran’s oil export terminal, which would likely prompt Iran to close of the Straits of Hormuz, effectively stopping all exports of crude oil from the Gulf. While such a sequence of events is unlikely, it would precipitate a huge spike in oil prices.
Unusually this week saw the Rand hold steady overall against the Dollar at R17.67 – it is very rare these days that the Rand stays in one place for a week!
The agri-commodities markets brought some good news too as strong export sales in the US pushed the CME maize price up almost 4%. We also saw the delayed effect of the Rand weakening slightly 2 weeks back pulling through in Safex values, with white and yellow maize up by 2 and 3% respectively, with the potential of further gains as the latest CME values come through. The oilseeds also performed very well as sunflower is up over 5% on Safex and soya rising by almost 3%.
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