Nitrogen
The Middle East price benchmark dropped $35/t this week on the back of the Indian tender prices that were published on Thursday. Another strong sign of producers’ desperation for sales was that over 2.6 million tons of product was offer against the tender volume of 1.5 million tons. The Indians have already issued a counter-bid to all the tender participants at the lowest price received in the tender process. The Indians could well choose to buy more than their intended 1.5 million tons – that is certainly what the producers will be hoping!
In general demand for urea remains low but a few pockets of demand are emerging in the form of demand for top-dressing in the US as the spring planting is almost complete. Wet weather has delayed some of the fertilizer application in the US Cornbelt so growers may all enter the market at once to get hold of urea in the remaining window for application. This could spark some concentrated demand and support prices in the US. The volumes are unlikely to move the global supply-demand balance much, so urea prices are more likely to stabilize at close to the current levels ($650-700/t fob) than bounce back up.
Ammonium sulphate prices saw a downward adjustment this week as producers bowed to the price pressure created by urea’s decline in recent weeks. Buying interest for amsul is returning in a number of markets. Ammonium nitrate prices dropped further this week, although by a much smaller amount than last week. There is talk of Russia looking to export AN to ‘Russia-friendly’ markets, which will boost overall supply and add further pressure to AN prices.
Phosphates
Phosphate prices around the world saw a meaningful downturn, as lack of demand continues to limit trade. The Indian government has also intervened and has set a maximum price for phosphates that it will allow the parastatal buying entities to pay.
Phosphates demand in Latin America continues to be minimal and the price in Brazil dropped $70/t (R1120/t) this week. Brazilian MAP prices have dropped by $165/t in the past month. Prices in Europe and the US have also declined this week, although by about half the amount of the Brazilians.
With Indian buying now seemingly capped by the government-imposed price, it will be interesting to see who blinks first as the gap between the Indian price and the market price is around $100/t – the producers are well-aware that there is not a lot of buying interest and the Indians are the big volume buyers right now, while the Indians have critically low phosphate inventories and cannot delay purchases for very long.
The Chinese are getting ever closer to resuming phosphate exports as the domestic season finishes up and the export price for phosphates is $300-400/t higher than the Chinese domestic price. Thus there is plenty of financial incentive for Chinese producers to export as soon as they’re able. This will/should add further downward momentum to phosphate prices in the middle of the year.
The Middle East (Saudi Arabian) price that effectively sets the import-parity costing for our region dropped by $60/t this week, which is reflected in the 4.5% drop in our local MAP cost assessment. The weakening rand and a slight up-tick in freight from the Arab Gulf to Durban offset a portion of the price drop.
Potash
Potash prices remained flat in almost all markets around the world this week. The market situation remains unchanged with the high price destroying demand and lack of available product counter-balancing the lack of sales.
There is a growing opinion that potash prices have peaked for this year, which will relieve many buyers. However there is no sign of a significant downward correction yet, while Russia and Belarus remain largely out of the global market. Industry analysts are now predicting the global consumption of potash will drop by at least 10% this year, which begins to quantify the impact of high potash prices on agriculture.
General Market Outlook
Crude oil prices remain volatile this week as oil looks to close at around $109/bbl. Dollar strength causes more weakness for the rand.
The Brent crude price dropped as low as $102.5/bbl during the week as concerns about weakening demand for oil caused the price to come off the highs of last week. Supply concerns following the embargo against Russia gave oil prices some strength in the latter part of the week. US Henry Hub gas prices retreated from the high of $9/MMBtu last week, going as low as $6.5/MMBtu before rebounding to $7.8/MMBtu currently. There are increasing concerns around the European gas price as the Ukrainians have now blocked the flow of Russian gas to Europe that passes through its territory – this is around 30% of the gas volume that Russian normally supplies to Western Europe. Despite this move, the European TTF gas price has declined by around $3/MMBtu this week to touch on $29/MMBtu, which is a 3 month low.
The international CME maize price showed some gains this week on lower-than-expected yield estimates from the USDA. Local white maize stepped up 2% on the Safex on the back of the CME price movement and the slightly weaker rand, while yellow maize gained almost 3% on Safex. Wheat was the big gainer this week with the Safex wheat number gaining almost 6%. The oilseeds prices were flat, with some of the longer dated futures declining very marginally.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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