Nitrogen
Urea producers look towards the US import market as the Indian tender is delayed into February. The market remains heavily over-supplied.
The American Urea market is expected to show strong demand for the spring season with farm economics looking strong for the upcoming season. That being said, there is already a big line-up of urea cargoes destined for the US and any price increase will encourage even more product to head that way. Urea demand in South America remains very weak and prices in Brazil continue to edge downwards. Demand for urea in Europe remains muted as gas prices remain low enough for domestic nitrogen production to be viable. Urea looks set for continuing price reductions until the Northern Hemisphere refill programme and the next Indian tender begin.
The Ammonium sulphate market has been quiet due to the Chinese New Year holidays, however the limited trade that did take place resulted in prices continuing to drift downwards, losing around $5/t and price of granular product is approaching the $200/t level. Ammonium nitrate prices moved sharply downwards in a long-awaited adjustment to bring AN prices more in line with the rest of the nitrogen products. CAN dropped $40/t in Europe but remains more than $100/t more expensive than urea. With the European spring approaching, CAN sellers will need to keep their offers competitive or risk losing volumes to urea.
Ammonia prices remain under pressure, although price cuts this week were quite small as the Middle East price dropped around $20/t. Buyers are generally reluctant to commit as they expect lower prices in the coming weeks. Most ammonia consumers appear to have adequate stocks and therefore are not under any pressure to buy promptly.
Phosphates
Phosphates markets resume a downwards trend in prices as India sees the biggest reduction.
The Indian DAP price dropped by more than $30/t as the Indian government starts to cut its fertilizer subsidy. This is pushing phosphates prices down but is a somewhat risky tactic as India could quickly run short of phosphates if producers stand their ground on price.
MAP prices were stable in all the major markets this week as the slight rebound in the Brazilian price appears to have run out of steam. .
The Q1 quarterly phos acid contract price to India is still under negotiation. Latest indications are that prices as low as $900/t have been proposed by the Indian buyers, while sellers are at $1,100/t. The Q4 2022 price was $1,175/t so it is clear that the price will be a fair amount lower, the question is by how much.
Phosphates prices appear to remain under downward pressure in most markets, although there is some optimism from sellers that strong demand may emerge for the USA in the next month or two. It seems likely that at best this might keep prices stable at currents levels, otherwise phosphates will keep drifting slowly downwards.
Potash
Regional Potash prices continue to converge, as European prices see a marked drop this week.
The Indian potash contract price negotiations remain the main topic of discussion in the market. Potash prices fell $40-50/t in Europe as the price there approaches $700/t, which is about the same as the current South African price – these are the highest prices in all regional markets currently. Prices also edged down in the USA and South East Asia.
Demand for potash in Brazil is very high as Safrinha plantings are progressing well. The large potash inventory in Brazil is being consumed steadily in this process but whether the rate of consumption is sufficient to tighten the local market is unsure.
General Market Outlook
Brent crude oil prices rise strongly this week from $78/bbl to $84/bbl. Expectations of energy markets steadying this year is creating optimism in most economies.
Brent crude prices gained more than 7% this week as oil consumption figures for China increased and expectations of less aggressive interest rate hikes in the US. The US Energy Information Agency in its recent short term energy outlook issued a forecast that Brent crude will average $83/bbl for 2023 and average $78/bbl. If these forecast oil prices prove to be realistic, this price level will provide downward pressure on fertilizer production costs and probably sustain fertilizer prices at current levels or perhaps lower. The European TTF gas prices bounced around in the low $20s/MMBtu this week but look set to close back at the $20/MMBtu mark. US natural gas prices are stable at $3.5/MMBtu currently.
This week saw CME prices firming as the US economic outlook was boosted by expectation of interest rate hikes being less aggressive. On the local front the opposite applied as the rand recovery against the dollar caused Safex numbers to go negative week on week. The exception to this was sunflower, which saw a 10% rise this week – this was driven by tightening local stocks and consumption being much stronger than predicted at the end of last year.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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