Nitrogen
Announcement of Indian urea tenders puts the brakes on falling prices. Other Nitrogen products continue heading down
Urea firmed very slightly this week as the next Indian tender was announced. Prices rose in certain markets as traders moved quickly to cover any near-term short positions to avoid having to compete with the Indians. There was little trading activity out of the Middle East this week, with the price range being assessed at $330-340/t, which increased the average price by $2.5/t.
The Indian tender is seeking a total of 1 million tons for delivery by 1 June 2023. The long delivery window is quite unusual for these tenders and points to the Indians having comfortable stock levels and not being desperate for prompt delivery. They are also hoping that the longer window will encourage very aggressive (low) offers from participants because the long window affords suppliers the opportunity to use the Indian volumes to balance their inventory positions. The Chinese domestic price is close to $400/t so they are not expected to feature in the tender but with sales having been slow out of the Middle East for the past month, the Arab producers are expected to target the tender heavily.
The Brazilian urea price moved up almost $20/t on news of the Indian tender as sellers at the low end of the price range lifted their prices. High maize prices in Brazil are supporting urea demand and early buyers for the next spring season are concluding deals.
Ammonium sulphate prices declined 2-3% this week as it tracks recent urea values and some demand has been seen in South East Asia. As the urea price fall paused, Ammonium nitrate prices continued their downwards adjustment to move closer to urea nitrogen values. Russian ammonium nitrate prices fell 20% ($65/t) this week as some sales to Brazil were finalized. European CAN prices fell EUR30/t to break below the €400/t level for the first time in almost 18 months.
The ammonia market is under increasing downwards pressure as North American and European demand is non-existent. Producers are being forced to look towards Asia where prices were already quite a bit lower than the West. The Middle East price lost a further $50/t to drop below $600/t this week. The outlook is for further price reductions in ammonia.
Phosphates
A mixed bag for Phosphates this week, with price drops in most regions and the US bucking the trend as early spring buying kicks off.
DAP prices declined almost $20/t into India this week as sellers shift volumes quickly before the new Indian fertilizer subsidy scheme kicks in in April, with the logic being a $20/t discount is better now than holding on for a few months when the Indian breakeven number will probably $40/t lower than recent prices. .
Brazilian MAP prices were unchanged this week but phosphates markets throughout South America are said to be weakening as slow sales see pressure building on sellers. The Saudi MAP benchmark was down $25/t to almost $600/t fob as pressure from the falling Indian market impacted prices.
Prices in Europe fell $10-15/t this week but the regional price is still a good $100/t higher than most MAP/DAP benchmark prices.
The outlook for phosphate prices in most regions is for continuing price reductions – raw material costs of ammonia are falling, and the return of Chinese exports in Q2 will increase supply substantially. Indications are that Chinese production for 2022 was down around 2 million tons on 2021, however Chinese phosphate exports were down 4.5 million tons. Assuming a broadly similar domestic consumption for 2022, this points to an inventory build-up of 2.5 million tons – when the Chinese government eases export restrictions, there could be a flood of phosphates onto the market.
Potash
The Potash market remains depressed, as the local South African price sees the long-awaited downwards correction.
Some buying activity was seen in the US as the spring season slowly kicks into gear – Potash prices in the US are amongst the lowest in the world at around $400/t and traders are talking of re-exporting from the US to Brazil. While this may bring the US and Brazilian potash prices closer together, it is unlikely to arrest the ongoing down-trend for potash around the world.
The recent falls in South East Asian potash values have caused the Indians to engage in a further round of negotiations on their annual potash contract. The settlement of this contract price remains the next big direction signal for potash prices.
The local cfr potash price saw a 25% downward adjustment this week, dropping from $700/t to $523/t. Indications are that this massive movement was precipitated by a local importer slashing prices on old stock to liquidate a position before the first 2023 cargo arrives. How much stock is currently available at this price is anyone’s guess and we will watch closely to see how much buying interest this repriced stock generates. Given where Brazil price levels are at present, the price in the low $500s is probably fair.
General Market Outlook
A stable week for the major macro-economic indicators, Rand remains weak above R18 to the USD.
Brent crude oil has now been in the $80s per barrel for the past month. The oil price has drifted downwards from $85/bbl to trade presently at $82.6/bbl. The European TTF gas price has remained in the high teens this week, ranging between $15-16/MMBtu, which has been supporting nitrogen fertilizer production across the EU. US natural gas prices dropped below $2/MMBtu earlier this week but returned to $2.3/MMBtu quickly, where it has remained fairly stable since.
CME maize and wheat prices took a hit this week to the tune of around 3% down after a combination of improved outlooks on South American yields and a degree of profit-taking from traders. Safex maize and wheat have been slightly positive week-on-week, mostly due to the Rand devaluation.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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