Nitrogen
Indian tender closes on Monday and is likely to attract huge volumes
As regularly happens with urea, the ‘herd mentality’ has sent prices tumbling. With both producers and buyers holding back on trade in anticipation of the Indian tender that closes on the 11th, the market suddenly appears to be long and prices ideas have plummeted. Perhaps the urea market is way longer than anyone expected but this price reaction appears to be of an emotional response than a fundamental one. Irrespective of the reasons for lower prices, the Indians look set to really benefit from much lower prices than have bene seen in the past few months.
Demand in many Northern Hemisphere markets is slow. Europe is very quiet, which has put the Egyptian urea price under pressure and it has dropped form over $400/t FOB a few weeks back to $360/t and still finding no takers. If the Egyptians need to participate in the Indian tender, then that will both increase volumes and pressure prices down.
Urea prices in the Middle East were assessed at almost $20/t lower – the price is now sitting in the low $350s. This price adjustment is based on 1 or 2 trades in what was a very quiet week of trading. So there is a risk that this price is not really reflective of where the market is at, given normal liquidity. Of course, the Indian tender will reveal a more solid idea of pricing.
Brazil had another quiet week and with its long lineup of urea vessels already en route, a number of exporters that were hoping for some Brazilian business may now be forced to look towards India. A good example of this is Nigeria, which has built up a big urea inventory – the Nigerians may look to India to shift some of their volume, which will add to the competition in that tender. Brazilian trade data shows that more than 6.5 million tons of urea was imported for the January – October period, which is more than 1 million tons than the same period in 2023. Russia, Iran and Venezuela have supplied 2.8 million tons of that volumes – showing the significance of the sanctioned origins in the Brazilian supply. If Brazil slows down, then those producers are left to scramble to find alternative markets that are open to them.
Egypt has been struggling to move volumes and producers cut prices this week to drum up business. The Egyptian price has approached $380 and is only $10/t or so above the Middle East price – which brings the Egyptians into the frame for the Indian tender, should they wish to participate.
The South East Asian market is also quiet, with Australia now having concluded its urea procurement for this season. There is talk that the SE Asian producers may also look to the Indian tender to off-load some volumes.
Even without the Chinese being active in the market, it looks certain that the Indian tender will attract a huge amount of offers. The Indians are looking for up to 2 million tons and it appears that they will be offered way more than this. The freight market is also a little bit lower, thus the Indians may enjoy low landed costs under this tender. Early indications suggest a tender price of $360/t CFR India may be realized – which would equate to a Middle East price in the low $340s.
Ammonium sulphate trended down lower again this week as lack of demand from Brazil and ample supply from Chinese producers influenced the market. Of course, lower urea prices added to the negative tone in nitrogen pricing. Amsul producers are optimistic that prices will start to stabilize and even rise in the coming months as they have sold the majority of their positions for November and December and are therefore less pressured to discount going forward.
Weaker nitrogen values are impacting Ammonium Nitrate prices, with minimal demand evident too. Brazil is showing little interest for nitrates, with big lineups of cheaper (in nitrogen terms) amsul and urea.
Ammonia prices were stable again this week. There is talk in the market of the Western Hemisphere being tight, particularly Europe but given the apparent weakness in urea pricing, it is difficult to see ammonia prices having much upside. The cost of production in Europe, due to high natural gas prices, is distorting the market somewhat.
Phosphates
The outlook for Phosphates pricing remains stable to negative
The American and European markets saw DAP prices making modest declines this week. With Asian and South American markets quiet, traders focused on the Northern Hemisphere buyers. DAP prices are currently in the low to mid $600s in Europe and the USA.
The only meaningful volume of phosphate business this week was the Ethiopian tender. The Ethiopians are seeking 1.2 million tons of DAP but were only apply to secure just under 200,000t of Chinese DAP. The absence of product available in the timeframe specified by the Ethiopians and limited participation has meant that the Ethiopians must continue to chase after product.
Not much other new business was concluded this week. Most of the larger players remain busy executing shipments to customers. The Indians have bought a lot of cargoes in recent months and these are busy shipping.
The MAP sector remains very illiquid, with almost no spot trades being seen. Most of the MAP that is being shipped was traded under contract. Brazil remains the major destination for MAP and it is well supplied at present. The same old story of difficult crop economics is being used to explain the weaker than normal demand in South America.
Latest trade data to Brazil shows that MAP imports year-to-date are now lagging the same period last year – in line with weaker demand and inventory drawdown taking place.
Potash
Belarus proposes cutting back on Potash production in an effort to support prices
In another week of flat pricing, the big news in the potash sector was the announcement by the Belarussian president that Belarus and Russia should explore the reduction of their potash production by around 10%. The proposal is an attempt to push the potash price up. Belarus is suffering under the current sanction regime and potash is one of its biggest exports and hard currency sources. Unless the Russians joined the proposal, a 10% decrease in Belarussian exports is unlikely to materially affect supply-demand balances. This is something to keep an eye on but at this stage, no big price movements are anticipated.
In other political news, the Canadian west coast export ports, where the majority of Canadian seaborne exports pass, are shutdown due to strike activity. Some impact on potash exports is expected in the short term but with the market being long and the strike not expected to be prolonged, there are no major concerns at present.
There was little trading activity in any of the major markets this week and prices were all unchanged.
General Market Outlook
Will Trump election victory lead to economic growth?
The US elections were the main driver of economic developments this week. Brent Crude oil rose moderately during the week due to concerns of an emerging hurricane in the Gulf of Mexico – these concerns have since subsided and the oil price has stabilized around $75/bbl. The market is pricing in the possibility of increased sanctions on Venezuela and Iran by Trump, which would throttle oil supply and tighten the market.
European natural gas prices briefly dropped below $13/MMBtu during the week but have returned to trading just above $13/MMBtu as colder weather sets into the EU. American natural gas prices were briefly boosted over concerns around production being impacted by the latest hurricane. The gas price has since returned to $2.7/MMBtu, where it began ethe week.
International maize and soya prices rose strongly this week, driven by a number of factors. Firstly, there was a surge of buying from a number of major traders who were concerned about the election outcome. Secondly the latest export data from the US showed higher than expected exports, which boosted prices. Brazilian export data shows that Brazil’s maize exports to November are down by more than 30% on the prior year – suggesting a shortage of product and causing traders to pay a premium for grains from other origins. A similar situation exists with soya, where Brazilian exports are almost 50% down. CME maize and soya futures are up around 4% this week.
The US election caused extra volatility in the Rand this week, with the Rand briefly weakening to R17.80 before recovering to R17.50 today.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
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