Nitrogen
Urea prices were soft again this week, with further price drops seen in some regions as demand remains minimal. All other Nitrogen products are following urea’s lead and prices are static.
Urea producers were confident a week or two back that they would have buyers queuing up for October and prices would firm up - they are now expressing some concerns with the absence of enquiries for product and are conceding that prices may not rise as much as they had hoped. The next Indian urea tender is expected for mid-October but even if that tender absorbs 1-1.5 million tons, the available supply for October is far in excess of this. The Middle East urea average price was largely unchanged, however the spread between high and low doubled. The High was created by a single trade reported at $700/t with minimal details around the buyers and destination for the cargo, which makes us question the deal and the price. The Low price of around $600/t is much more representative of the trades executed this week – so our feeling is that the Middle East urea price is realistically at least $25/t lower than the quoted prices.
Urea trading activity has risen into most South American markets as their summer seasons kick off – with the notable exception of Brazil. Brazilian urea inventories are the highest they’ve been at this time of year in the past 5 years, which explains the lack of interest in spot urea cargoes.
In overview, urea prices are expected to rise during Q4 as Northern Hemisphere buying picks but the upturn in prices may only begin towards the end of October, a month or so later than the usual trend. There are a few flags to keep in mind over the coming quarter:
- Sabotage of the Nord Stream 1 and 2 pipelines this week means further disruption to already reduced European gas supply, and raises the risk of further gas stoppages and higher prices for Europe
- Crude oil prices have moved down into the high $80s per barrel but the raised uncertainty around Russian tactics in the Ukrainian means that big swings in oil are possible. And a swing of +$30-40/bbl will impact Nitrogen prices and likely push them higher.
Ammonium sulphate prices saw a slight reduction this week as Chinese traders were actively selling ahead of their week-long national holiday next week. Amsul continues to trade at a substantial discount to urea in Nitrogen terms.
Ammonium nitrate prices did nothing again this week as the European market is at a standstill with gas supply limitations ongoing and the Q4 stocking season not really active at this stage.
The ammonia market has been quiet for a few weeks now, with demand for ammonia being limited by the fact that prices for downstream nitrogen fertilizers (that consume ammonia) have been flat. Most markets seem adequately supplied and regional ammonia prices are sitting around $1,000/t.
The weak Rand, a slight up-tick in freight from the Arab Gulf to Durban and the nominal increase in the Middle East urea price combined to push the import parity cost up by 3% this week.
Phosphates
The outlook for Phosphates prices continues to look weak as demand is weak in all major regions and the handful of buyers are pushing for big reductions on current price levels.
The Indian phosphate buyers are pushing for big discounts on DAP – no doubt encouraged by the fact that they have ample stocks levels, thus they are under no pressure to compromise on price. The Indians are also well-aware that the worldwide phosphate market is soft and prices are sliding with no immediate threat of turning back up.
Brazilian MAP prices are said to be slipping below the $700/t level, which may add downward pressure to the Middle East fob price. Indications are that the lowest prices currently offered in Brazil would equate to a $50/t drop in the Middle Eastern price.
The hurricane striking the Florida coast has forced most of the Florida-based phosphate facilities to close down temporarily, which sparked a price rally in the US for phosphates. This is unlikely to influence global markets as the duration of the hurricane and its impact on phosphate capacity in Florida is not expected to disrupt phosphate supplies beyond a few weeks.
Other factors relating to phosphates remain unchanged – the quarterly Indian phos acid contract price is still under negotiation, the Chinese export restrictions on phosphates remain in place and Russia continues to export phosphates to any countries prepared to transact with it.
Potash
The Brazilian Potash price sheds $25/t this week as Potash continue its down-trend across the world.
The Brazilian potash price has now dropped below $700/t – a price level last seen in August 2021. The Brazilian price has been falling faster than all other regional potash prices and something of a disconnect is emerging between Brazil and the rest of the world. What this is likely to mean in practice is that potash producers will target other markets as they offer better returns, and focus less on Brazil. Increasing supply to other markets is likely to depress prices in those markets, and restricting supply to Brazil should provide some price support. The net result is that the various regional prices should start to align more closely.
The South African potash price is largely unchanged this week, with the rand devaluation against the dollar pushing the local import parity cost up by around 2.2%. It is possible that South African prices could fall further but there would need to be some liquidity in the local market with product being sold and creating space for new imports at a lower price.
General Market Outlook
Brent crude oil held steady in the upper-$80s/bbl. Continued US Dollar strength forced the Rand above the the R18:$ level this week.
The Brent crude price dropped as low at $84/bbl earlier this week and currently trades at $88/bbl. Dollar strength versus other leading currencies and concerns over a potential global recession are keeping oil prices in the current range. The European TTF gas price broke through the $50/MMBtu level briefly during the week but damage, suspected to be sabotage, to the Nord Stream pipelines has raised fears of further disruption to European gas supply from Russia and the TTF price has reacted and is presently at $57/MMBtu. The US natural gas price has been stable this week at just under $7/MMBtu.
The CME futures for maize lost 3.5% week on week, and CME Soya lost 3% in the same period. On Safex we saw the effect of the weaker rand come through as white and yellow maize rose just over 1% each. Local soya prices couldn’t buck the trend and followed the CME Soya price down, losing 1.6% in the week. Safex wheat rose around 1.4% week-on-week.
The latest (8th) estimate of the 2021/2022 South African harvest was published this week. This latest estimate shows combined white and yellow maize up by 1.4% (255,000 tons) to 15.26 million tons, which compares with the prior 5 year average of 14.44 million tons. The soya harvest was raised by 1.3%, giving a total harvest of 2.2 million tons which beats the previous record harvest by over 300,000 tons!
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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