Nitrogen
The global Urea market remains extremely quiet with the postponement of the December Indian tender increases pressure on producers to chase sales.
The Urea market remains characterized by an abundance of supply and unusually low demand given the time of year. The Indian tender scheduled for mid-December was pushed due to delayed deliveries of product from the prior tenders and adequate urea availability in India. The downward trend of the urea price likely also factored in as the Indians considered that lower prices would be achievable in January. Indications are that this delay has left producers with high stock positions – the Middle East producers are believed to have in excess of 700,000 tons unsold for January, the North Africans about 300,000 tons and the Europeans and North Americans have ample urea inventories.
The question now is how far and how fast will urea prices fall from here? And will there be any rebound during the Q1 period or will prices keep sliding to into Q2 when prices usually hit their annual low point?
 Fertilizer markets and the Rand generally stable this week.
With urea setting a negative tone for nitrogen prices in general, Ammonium sulphate has moved down considerably over the December period, dropping 10-15% depending on the grade. Ammonium nitrate prices have remained stable for the past month but this is more due to a lack of sales activity than strong demand. As Europeans buyers return from the holidays and need to pick up the pace on the pre-spring stocking programmes, we will see where AN/CAN prices really are. The likelihood is that prices will move down because producers cannot risk losing volumes and have urea displacing their product.
Ammonia prices have been gradually heading down over December as gas price concerns eased somewhat in Europe. Prices are now well below $1,000/t in all markets and some markets below $900/t now. The outlook is for ammonia prices to keep moving down as supply exceeds demand and the current price of ammonia on a unit of nitrogen basis is higher than a unit of nitrogen in urea.
Urea trade data was released for the January to November 2022 period for South Africa Imports for this period were around 800,000 tons versus over 1 million tons in the same timeframe in 2021. 800,000 tons is about the normal annual consumption of urea in the SA market, so there is no real concern over the market being short. It does suggest that urea stocks will be relatively low at the end of the season, which is probably a positive factor for the overall industry as it means that expensive stock should have largely moved through the system. Interestingly, ammonium sulphate trade for the same period was around 320,000 tons, which was the exact same figure for the prior year.
Phosphates
Phosphates prices have generally been steady in most markets for the past few weeks, as the price differentials between major regions start to narrow.
Brazil saw a $15/t increase in MAP purchases this week, which marks a rise of around $50/t in the Brazilian MAP price over the past month. This is more a balancing of the MAP regional prices than a sign of an upturn in global prices; Brazil remains $50/t below European and American MAP prices. All of the other regional MAP markets saw price reductions of $15-20/t as the price gap reduces between regions.
The Middle East MAP price remained unchanged this week but freight rates from the Middle East to Durban dropping from $30/t to $25/t helped reduce the Durban CFR price. Unfortunately the rand losing over 1% to the Dollar caused the import parity cost to rise 0.5%.
Phos acid contract prices are under negotiation between the Moroccan producers and customers in Europe and in India. Q1 prices for Europe have tentatively been agreed but the India price discussions are still ongoing. Expectations are for the Indian quarterly price to be settled $50-100/t lower than the Q4 price, which should yield a price around $1,600/t P2O5.
South African trade data for MAP for January to November showed imports of 230,000 tons compared to 300,000 tons in the same period last year, a 23% decline. This is attributed to Foskor’s improved production and local sales volumes, as well as an element of demand destruction due to the record high prices of MAP this year.
Potash
Potash prices continue to converge between regions as the Indian and Chinese annual contract discussions are underway
The Indian potash market is historically a 5 million ton import market, although this volume has been lower in the last two years as the high cost of potash impacted affordability and thus demand in India. China imports around 9 million tons of potash p.a. and is the 3rd biggest importer of potash after the USA and Brazil. Considering that total global potash demand in 2021 (2022 full year data is not available yet) was around 72.5 million tons, the importance of India and China as potash buyers is clear. Both countries are comfortable trading with Russia, so they have access to all the major producers – the conclusion here is that they will negotiate fiercely to achieve as low a price as they can. Current expectations are that a price of $450-500/t CFR should be achievable.
The Brazilian price is presently around $515/t CFR and South Africa is paying around $700/t, so the India target looks competitive. What should not be ignored is that potash prices have considerable momentum and any up- or downturn is usually sustained over many months. This suggests that the current price decline could continue for some months, and the Indian price that looks appealing today may well be expensive in 6 months.
Potash prices in Brazil have lifted $5-10/t over the past few weeks as purchasing for the Safrinha crop increases. In the US and South-East Asia, prices continue to slide down – this is bringing the potash prices between these regions somewhat closer together.
South African import data for 2022 to November indicated imports of around 330,000 tons compared to 390,000 tons in 2021, a 16% reduction.
General Market Outlook
Brent crude oil back in the $70s per barrel range as recessionary fears impact the price. Concerns of crops prices being impacted by probable recession are not good news for local growers.
Brent crude oil started the year above $86/bbl as prices rebounded from the $76/bbl seen in mid-December. Prices fell to $78/bbl as markets reopened this week. The European TTF gas price has fallen dramatically over the past few weeks, from $46/MMBtu in mid-December to the current level of $20/MMBtu. This is a very positive development for the whole European economy as not only is gas the primary heating fuel as Europe hits mid-winter but industry is benefitting as well. The European fertilizer production base has all restarted and increased domestic production is a contributing factor in the downturn of fertilizer prices. The US natural gas prices have seen a similar evolution as prices have fallen substantially from $7/MMBtu in mid-December to $3.5/MMBtu currently. This is the lowest gas price seen in the US for more than a year.
Commodity crop prices have mostly moved sideways. Changing outlooks on yields and hectares planted and dollar fluctuations against other major currencies have all played a role. CME values for maize, soya and wheat have all dropped by 3-4% this week, driven by rising concerns that a number of major economies will enter into recession this year. Local crops prices on the Safex were less bearish, although everything except wheat was down week-on-week. The rand weakening this week probably helped offset some of the declines seen on the CME.
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