Nitrogen
Urea market remains awash with negative price sentiment with oversupply and absence of buyer interest evident in all regions.
Urea prices fell in almost all regional markets again this week, with price drops of 8-10% seen. The one exception to this was the Middle East urea price index, which is the benchmark that sets Southern African price – the Middle East price in fact rose very slightly this week as a deal was concluded at the top end ($407/t FOB) this week, which dragged the price for the week up by $3.5/t. The rebound in US prices that got producers excited turned out to be very short-lived, as many sellers turned their attention to that market and quickly saturated it and brought prices back in line. The Brazilian price fell $30/t this week to sit presently at the $380/t level. Large import volumes of ammonium sulphate into at comparable nitrogen values to urea are keeping urea prices under pressure. Most regional prices have now normalized in the high $300s price range. Prices are likely to keep edging downwards until the next Indian tender is confirmed – this tender is not expected to be announced before then end of February or beginning of March, so it could be a long month for producers.
One of the Indian import agencies was running a ‘long-term’ urea tender (i.e. 600,000t to be delivered over the next 12 months, instead of the usually 6-8 weeks delivery period stipulated in the regular Indian tenders) and this tender has been cancelled due to lack of offers. This leaves even more urea unbought in the market.
The Ammonium sulphate prices edged up slightly this week, which has resulted in the nitrogen value rising above that of urea, which has not been the case during the past 6 months. With urea prices remaining under pressure, it will be interesting to see whether amsul sellers can maintain this premium or are forced to discount to keep amsul sales moving. Ammonium nitrate prices fell again this week in all the major AN markets, as declining ammonia and urea prices dragged nitrogen values down and spring demand is slow to emerge. CAN prices dropped a further $25/t in Europe this week and there is a lot of market gossip about AN and CAN cargoes from Eastern Europe being offered into Western Europe at substantially lower numbers, which suggests further price falls may be in the pipeline.
Ammonia prices were again slashed in the Middle East by $25/t this week, as the worldwide ammonia sector continues to experience a gloomy outlook. Demand is weak in most regions and the Northern Hemisphere markets which should be well into their spring ‘fill’ programmes are seeing a slow start due to weather and nitrogen values are very much limited by urea prices, i.e. all other forms of nitrogen are more expensive than urea and buyers are thus encouraged to push hard for price discounts.
The price outlook for all nitrogen products for the coming month is for prices to remain under pressure. February is never a big month for fertilizer trade into the region, with the exception of the Cape. There may be some relative bargains available for Cape buyers but most will be tempted to pause on the sidelines and delay purchases in the hope of lower prices. Cape importers are left in the tricky position of trading off timely imports and ensuring adequate stock for the upcoming Cape season against the risk of sitting on expensive positions if the market, as expected, continues to drift downwards.
Phosphates
Phosphates markets remain flat again this week, as local producer Foskor hits the headlines with a phos acid contract price being agreed with the Indians.
DAP prices moved around $5/t down in most regional markets, closing the gap to MAP prices. The Saudi MAP price declined $8/t this week, lowering the import parity cost of MAP by nearly 1.5%. The Chinese export restriction on phosphates remains in place, however the global market remains adequately supplied. Major Moroccan phosphates producer, OCP, is running its granular phosphates production at around 50%, which is a clear indication of the lack of demand, especially in the Western Hemisphere. If the Moroccans increase production or the Chinese resume exports then phosphate prices will be pressured downwards.
Foskor agreed this week a Q1 phos acid contract price of $1,050/t with an Indian importer. This is a $125/t reduction from the Q4 contract price. While this is a significant drop, it may yet prove to be a shrewd move by Foskor as phos acid contract prices have not been agreed between the Indians and the major producers in Morocco, Jordan and Senegal – with the Indian government working hard to push phosphate prices down across the board, these producers may be cornered into accepting prices closer to the Indian target price of $950/t. This could leave Foskor as one of the highest priced sellers into the Indian acid market. The Indian phos acid contract price is also the basis of the local phos acid price, so while $125/t lower is good news for local acid buyers, phos acid remains a much more expensive source of a unit of phosphate than MAP.
Brazilian MAP prices were unchanged this week on the back of good sales volumes being offset by large import volumes arriving through January.
Potash
Another week of inactivity in Potash markets as prices around the world were unchanged.
The potash sector remains focused on a handful of price-setting events that are expected to conclude in the coming weeks. The Indian annual contract price is the primary event that the market is watching for guidance. The anticipated price is expected to settle in the $450-500/t range but the Indians remain hopefully that by delaying they can achieve a number closer to the bottom end of that range.
Brazilian potash sales have been strong in the past week, giving optimism to some traders that prices in Brazil might strengthen. However news on the supply side suggests that prices are highly likely to keep heading down in the coming months. Belarus, which remains under Western sanctions, is intending to boost its annual sales and exports by 1.8-2 million tons this year, which will largely be targeted at Brazil. Russian potash exports continue to rise month on month too. Plus there is the possibility of some of the idled potash mines in Canada to resume production. The potential for a boost to global potash supply is clear and with demand remaining moderate at best, the global supply-demand balance looks set to tilt towards oversupply and lower prices.
The delivered price of potash to Durban port remains at $700/t, unchanged for the past 8 weeks. This price will be due for a healthy downward adjustment when fresh product is imported as it remains well above prices in other markets.
General Market Outlook
Brent crude oil prices soften this week on a stronger Dollar versus other major currencies. Dry bulk shipping rates have been heading down on lack of booked volumes.
Weakening oil demand in the USA and the gaining on other currencies caused Brent crude prices ease downwards this week, dropping $7/bbl to trade at $82/bbl today. The European gas price remain low by recent standards at below $20/MMBtu, although the cold weather in Europe did cause prices to climb from $18/MMBtu to $19.2/MMBtu in the past week. US natural gas prices continue to surprise much of the market and dropped as low as $2.4/MMBtu earlier this week. Currently US gas numbers are just below $2.5/MMBtu. Warmer than usual weather is cited as being the driver of these low prices, plus the massive Freeport LNG facility that was closed by a fire in June is still about a month away from resuming operations.
The Rand made another small 0.6% improvement against the dollar this week, and remains just above the R17:$ level.
Shipping rates for the key Middle East to Durban voyage have been softening for the past few months. The Baltic Dry Index (BDI) which is the primary price index for bulk shipping has reported weekly declines for the past 4 straight weeks. Indications are that the Middle East to Durban voyage rates are now below $20/t – a rate last seen a good 4-5 years ago. There are a number of factors contributing to this low rate such as below-normal shipping volumes and the oil price softening from $105/bbl last September to the current ~$80/bbl. How long these low rates will last is an open question – as the local fertilizer sector starts picking up its imports from late Q2, the increase in volumes may support a recovery in shipping rates.
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