Nitrogen
Urea prices appear to be holding firm, encouraged by US interest. How long can this last before surplus supply of Nitrogen products pushes prices back down?
The American Urea market continues to dominate price discussions as product changes hands between traders as the rush to deliver cargoes to New Orleans (US Gulf) before the river closure takes effect – in essence only urea cargoes already on the ocean have a chance of being delivered in time. US plantings are well ahead of normal for this time of year, which explains the strong consumption of urea but an increasingly gloomy crop price outlook will be cooling fertilizer price ideas for farmers.
Producers hoping for India to provide support to urea prices were disappointed this week when the Indian authorities indicated that the next tender is at least a month away as the country has ample stocks versus expected consumption.
Urea prices in Eastern markets were generally down this week, driven by the increased availability of Chinese product as the Chinese ramp up exports again. In the West, the US saw prices of urea on barges rise, while South America and Europe remained broadly flat.
Some early cargoes of urea to Durban have now been booked. Two full vessels of granular urea from Iran are believed to have been fixed, which should be very competitively priced given the timing of the transaction and the usual discount that sanctioned Iranian product trades at. A mixed granular and prilled urea cargo from Qatar will discharge around 7,000t of prills in Durban, most of which will be destined for the animal feeds and industrial sectors.
Ammonium sulphate show an up-tick on prices this week as the Chinese exporters were able to lift their prices by $3-5/t. How long they will be able to maintain this is unclear - with the nitrogen market still looking oversupplied and therefore weak, amsul prices are unlikely to rebound by much or for very long. In Europe amsul prices are still falling, albeit from higher levels than the Chinese price.
Ammonium nitrate consumption has picked up in Europe where spring applications are now well underway. CAN sales in Europe are finally on the rise, although producers dropped the price by around €8/t. Russian AN prices remain under pressure as nitrogen values in Brazil, the Russian’s major destination currently, are low. Some medium sized parcels (8,000t each) of Russian AN are due to arrive in Beira in the coming few weeks.
Ammonia markets were more stable this week, with unchanged prices in most regions. The US Tampa contract price was settled about $50/t down but this reduction merely tracked the global market. A lot of trader activity has taken up most of the surplus ammonia in the market, which is contributing to stability. Some plant outages for maintenance and some breakdowns are helping too – producers in Europe are now watching the natural gas price closely as they are at the point where resuming production (instead of importing) may be viable.
With cereals being the major consumer of nitrogen, fertilizer producers are concerned that collapsing maize and wheat prices are going to hurt demand just as urea and amsul have shown some slight short term strength.
Phosphates
Phosphates prices head down as American price rebound runs out of momentum. Indian Q2 phos acid price closer to settling.
Reduced production costs for phosphates thanks to cheaper sulphur and ammonia, plus lower gas costs in many regions have depressed DAP prices this week. Ample stocks in almost all regions, apart from the US, mean that producers and traders are being forced to accept lower prices to achieve sales.
The Saudi MAP average price fell $5/t this week due to falling netbacks based on the $10/t drop in Brazilian MAP, which in turn is being influenced by large imports from Russia and high stock levels in-country. Chinese phosphates are now being seen in the Brazilian market too, after an absence of more than a year.
Chinese export prices dropped another $12-15/t this week, leaving them with a price of below $530/t FOB compared to their stated target of $550/t FOB. With phosphates prices weak and falling everywhere else, it seems the Chinese will be forced to take what they can get and not be too ambitious holding out for top dollar.
The first signs of a Q2 price settlement for phos acid in India emerged this week, with an Indian importer agreeing to a Q2 price of $970/t CFR with a single phos acid supplier. Other phos acid suppliers have apparently rejected this price and are holding out for higher numbers. With ammonia prices having been tumbling over the past weeks, even the reduced Indian phosphate subsidy that kicks in from next week still allows for a margin of around $100/t for DAP production in India with a $970/t phos acid price.
In the face of falling global MAP values and the threat of MAP imports from Russia and Saudi Arabia, local producer Foskor has dropped its price of MAP from around R12,200/t ex-works Richards Bay to R11,500/t. This puts Foskor just below any non-sanctioned origins of MAP and is a tactic to encourage early purchases from its larger wholesale customers and keep the pressure on importers looking at early cargoes of MAP.
Potash
US Potash prices have managed to hold onto gains for now, in Brazil and SE Asia prices keep drifting down
The stimulus provided by US spring buying and some short-term logistical hurdles that pushed potash prices up, has now come to a close.
The much hoped-for spark from the Indian contract price appears to have been snuffed out as potash prices continue to drift downwards in a number of major regions. Buyers are thus encouraged to keep delaying while they can and enjoy the lower prices that are resulting. In fact the Indians may well be regretting committing to an annual price as it appears inevitable that potash prices will fall comfortably below the $422/t they agreed to. Indian potash purchases for the first four months of the year are 50% lower than the same period last year.
It now seems that the unexpected ongoing absence of the Chinese from world potash markets is adding to the lack of demand. The Chinese have delayed their annual contract price settlement in attempts to realise lower prices.
After a quiet week last week, Brazil saw potash prices fall by around $20/t with the price sitting at close to $400/t. Some sources suggest that sanctioned Belarus product is available as low as $380/t. With potash stocks very high throughout the Brazilian supply chain and a big line-up of April potash cargoes totaling 1.4 million tons, potash sellers are anxious to stimulate sales and keep product moving.
The Rand weakening by 30c against the Dollar meant that the local import parity costing of granular potash by 1.3% to sit at just below R10,000 per ton.
General Market Outlook
Crude Oil prices keep falling amid US economic uncertainty, while Dollar strengthens due to interest rate hike expectations.
Concerns around the US economic outlook are negatively impacting commodities across the board. Brent crude oil lost another $3/bbl this week to trade at $78/bbl. The OPEC cartel surprised energy markets by cutting its production forecast (after its previous announcement of increased output caused prices to fall abruptly). The US strategic oil reserves are also markedly lower, which usually supports stronger oil prices. All these drivers achieved was a slowing in the rate of oil price decline this week. The US Dollar continues to strengthen against other currencies as another 0.25% increase in US interest rates is expected next week.
Natural gas prices in the major markets were surprisingly stable this week as most commodities tumbled. The European TTF gas price remained just below $13/MMBtu and the US natural gas price held steady at $2.3/MMBtu.
Ag commodities values continue to head south as a number of bearish factors push prices down.
- The Ukrainian grain export deal being negotiated between the West and Russia, seems to be showing signs of life with the Americans allowing JP Morgan bank to process payments through the Russian Agricultural Bank.
- Soya prices took another 6% dip on the CME as soya supply seems to be overwhelming demand. Argentina revised its soya production estimate down by 10% this week, which had no positive impact on the market, especially as the Argentineans also advised that their soya planting area for this season would be up by 10%. The big driver of soya prices was Brazil’s expectation of producing a record soya crop this year as their planting area has risen by 4% to 45.2 million ha this year.
- Early indications on the US spring plantings are that planting is way ahead compared to this time last year. And big averages are expected for both maize and soya.
- In Canada the biggest wheat crop in years is expected on the back of the biggest wheat area planting in more than 20 years.
On Safex, local cereal prices showed some stability this week after tumbling prices over the past few weeks. In all probability, the latest round of weakness on the international grain exchanges is yet to pull through fully in our market. The slightly weaker Rand may be helping but isn’t likely to be sufficient to counter the drop in US Dollar prices.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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