Nitrogen
The urea market was static this week as players expect European demand to emerge and coincide with the next Indian tender in early September. The consensus view is for urea prices to rise in the coming months but there is no common view on how high prices will go.
As we approach Q4 in 6 weeks or so, the Northern Hemisphere seasonal stocking programme will begin. This surge in buying usually pushes prices up – which is the reason we normally see fertilizer prices rise late in our Southern African fertilizer season – the late season cargoes are more expensive. With European urea capacity idled due to high gas prices, many European buyers are anticipated to start buying early and in greater volumes than historically because they want to secure their required product and at the lowest price possible. Early European buying is therefore a flag that we will be watching in the coming month because this will indicate increased demand and drive higher urea pricing.
There is also the next Indian tender which will soak up a large volume of urea in September. Details on tonnages are not known at this point but anything between 1-1.5 million tons would be in line with market expectations. In the mean time, August is likely to be quiet from a trading aspect. Producers are confident that serious demand will emerge in September, so they will resist any pressure to discount prices. On the demand side, the only real buying activity will be from a handful of Southern Hemisphere buyers, such as Southern Africa and Australia. Brazil and Argentina still have ample inventories and there are contract volumes that will be directed there but little additional spot buying is expected from South America in the next few weeks.
Ammonium sulphate prices edged downwards moderately this week as supply, especially from China, continues to be strong and demand has been quiet. Ammonium nitrate prices were flat this week, with the European market said to be quiet due to summer holidays and no trading activity. South African imports statistics for amsul show that amsul imports increased year-on-year about 40% (or 50,000t) to 175,000 tons for the first half of 2022, which points to amsul availability not being an issue in the region currently.
Ammonia prices were mostly flat this week, with only the Middle East fob benchmark registering a small increase. European gas prices rose further this week, which generated a lot of speculation that ammonia prices would rise again due to European buying. This has not materialized however. Ammonia supplies from most major production sites have been good, so there is ample availability at present. Prices will probably remain at current levels for the next month or so but as seasonal demand picks up in Q4, it seems inevitable that ammonia prices will increase again.
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Phosphates
Phosphate prices continue to drift downwards as demand remains very subdued, and the lack of phosphate availability from China is not sufficient to tighten the supply-demand balance.
Demand for phosphates is non-existent in virtually all regions except for India. The Indians have taken advantage of softening prices and no competition for product to buy significant volumes this past week. Lower Indian prices meant that the Middle east MAP price benchmark was dragged down by $15/t this week. High stocks and slow inland sales in Brazil saw MAP prices fall another $25/t there.
Phosphate production costs should be relatively favourable this week as ammonia prices have remained flat and sulphur continues to fall.
The outlook for phosphates remains bearish with prices predicted to keep losing a few dollars every week while demand remains poor and availability of product is not an issue. Chinese production continues to decline and domestic prices have fallen hundreds of dollars below international prices, so if the government permitted it, Chinese producers would resume exports quickly. This would add further downward pressure on prices.
Potash
Lack of demand pushes Brazilian potash prices down by $50/t, as FSU exporters start to cut back on exports in an effort to slow the price slide.
With potash prices falling in all markets around the world, the majority of buyers are postponing purchases as they wait for lower prices. Potash prices in North America, Europe and South-east Asia are all reporting drops of around $25/t this week.
The general market view is that potash is set for a steady decline over the coming 6 months, especially with the supply response expected from many of the other potash producers that was sparked by the predicted potash shortage resulting from sanctions on Russian and Belarussian exports.
General Market Outlook
Crude oil remained in the high $90s this week as oil demand grows as energy users switch away from gas. Grain markets enjoyed a positive week with buying activity increasing as concerns around the US crop continue to grow.
Oil prices appear to have stabilized for the time being, with the fall in oil demand being reversed as many gas users are now switching away from gas towards oil as the price differential between the two hydrocarbons is favourable. EU gas prices rose well into the $60s/MMBtu this week and US gas prices touched on $9/MMBtu.
On the soft commodities, US CME corn prices rose over 4% this week as buyers picked up their activity to lengthen their positions as fears continue to mount about the state of the US corn crop in the face of hot, dry late summer weather. Other major producers such as Brazil have also been trimming their harvest estimates, which has added support to prices. Safex maize prices also saw some support rising by 2% but much less than might have been expected when considering that the rand also strengthened by 2% on the week. Soya and sunflowers saw similar gains week on week – all good news for local growers.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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