Nitrogen
Urea prices drift down this week but the floor cannot be far off. The next Indian tender is looming and Q4 seasonal demand is starting to rise.
The next Indian urea tender should be announced in the next week or two and is anticipated to be chasing 1.2-1.5 million tons for shipment by the end of November. With more urea available out of South-East Asia and even China, offer into the tender are expected from a wide range of origins.
The Middle East urea price dropped by $25/t this week, as the high end of the range was reduced from $700/t to $650/t this week, and the Low was unchanged. In the marketplace, the Middle East price is broadly unchanged week on week as it was more the index price of last week that was not fully reflecting market levels.
The only regional market to show firming urea prices was the US and the $15/t increase was driven by local events – the hurricane that struck Florida created uncertainty on inbound urea imports, plus the rush to get urea barges moving up the Mississippi before the winter shut of the river system at the end of this month.
Ammonium sulphate and ammonium nitrate prices were flat this week as Chinese amsul traders were absent for their week-long national holidays and in Europe AN/CAN sellers are struggling to find buying interest with urea less than half the price of CAN on a nitrogen basis. Ammonia markets were equally quiet this week with prices unchanged across the world.
The August trade statistics for urea imports into South Africa were published this week and show that urea imports for January-August are around 420,000 tons this year versus almost 590,000 tons in the same period last year, a reduction of almost 30%. There are a number of factors behind this, primarily the urea price being around 50% higher this year that caused funding constraints and increased concerns around price risk. In August 2022 only 27,000 tons of urea imports were recorded, whereas last year 180,000 tons of urea came into the country. There are delays in Durban port and some urea cargoes have been delayed on arrival, plus the reporting of customs data tends to be a little slow. Therefore we would not read too much into this data, other than to be proactive in securing your urea volumes as it is possible that urea availability may become tight in the next month or 2.
Phosphates
Phosphates prices keep heading south as it appears Phos Acid quarterly prices are set for a 30%/$500 per ton reduction for Q4. MAP and DAP prices continue to slide in all major markets.
The main news in the phosphates sector was that quarterly phos acid contracts prices had taken a big cut from the Q3 price of $1715/t. Some of the Indian importers had already announced that they had agreed a price of $1200/t with the North African producers, only for the Indian government to weigh in and indicate that they would only support prices of $1000-1100/t, which meant the existing prices are now off the table. It remains to be seen where the contract price lands but it seems unlikely that it would be above $1200/t and may well be closer to $1000/t.
Brazil showed a 24% decline on its Q3 MAP imports versus the same period in 2021 and yet still has high inventories and sliding prices. This illustrates the extent of aggressive MAP sales by the Russians during the first half of the year and also the demand destruction within Brazil because of high prices.
The European phosphates price had the biggest downward move this week as it started tracking other international prices – Europe continues to trade at a premium for phosphates, probably because domestic production is idled due to the ongoing gas crisis in the region.
Hurricane Ian that struck the Florida coast caused some of the major Florida phosphates producers to shutdown production for safety reasons and some localized flooding was reported. These operations may be down for a few more weeks while minor repairs and clean ups are completed, but the overall output of phosphates isn’t expected to be materially affected.
Latest import data for MAP into South Africa shows that to August the import volume is about 15% lower year-on-year at 150,000 tons imported for the first 8 months. As with urea, we do not see this as a critical issue at this stage as port congestion and high prices have slowed down inbound cargoes. With local MAP producer, Foskor, reported to be running well, there is also local supply which reduces the dependence on imported MAP.
Potash
Another week of price cuts in the Potash market, as both Brazil and South Africa see reductions of $25-50/ton.
The South African import price for potash is now approaching $800/t with this week’s price cut. Brazil is now seeing prices in the mid-$600s, which suggests that more downside may be possible for South Africa if the historical trend of being in sync with the Brazilian market continues. Of course for this to happen, there needs to be some liquidity or trading activity into South Africa. The importers sitting on expensive stock are not going to be keen to take more pain by discounting their existing stock. With time starting to run out for new potash vessel bookings, the scope for fresh, cheaper product is limited.
The South African trade data for potash imports to the end of August show that around 195,000 tons have arrived in the first 8 months, around 25% down on the prior year. While the same issues around port delays and customs data mentioned previously do apply, we would also caution potash buyers that the risks and consequences of a potash stock-out are higher and greater than the other products – because there are only a handful of potash suppliers to source from. We understand that a 30,000 ton potash cargo is en route to Durban by the end of this month but given that supply into the market, as of end-August, is around 65,000 tons lower than 2021, there is a question as to whether this inbound vessel will be sufficient for the local market or not.
General Market Outlook
Brent crude oil gains 10% this week as prices touch on $95/bbl. A weaker dollar helps most commodity prices rise moderately..
The OPEC meeting this week where a decision was made to throttle back volumes has boosted the Brent crude price from $88/bbl to $95/bbl. The dollar also weakened versus other major currencies, which gave further support to oil prices. The European TTF gas price has managed to drift lower this week after hitting $55/MMBtu on Monday -it is currently trading around $50/MMBtu. The US natural gas price drifted down towards $6/MMBtu but rising oil prices and the weaker dollar saw it recover back to just under $7/MMBtu by the end of this week.
In a fairly muted week, all the grains and oilseeds saw around a 1% gain on the week – driven by the weaker. The rand however stayed at the same R18.0 level to the dollar, so local price gains were driven by the small increase in international dollar prices.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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