Nitrogen
Urea markets see prices drifting down again this week, with June expected to bring lower prices
Urea prices slid down this week as producers show willingness to negotiate with buyers as the IFA annual conference kicks off next week. IFA is the primary global fertilizer conference and participants are anticipating a number of deals to be done during the course of this event.
The North American and European spring application seasons are ending soon and so are opportunities for meaningful volumes of urea to flow into those markets. Buyers are increasingly confident that urea prices will fall and test the $300/t level during June. Even the next Indian tender is unlikely to be substantial enough to tighten the supply-demand balance.
The Middle East urea price was $10/t down this week, to just below $320/t FOB, and suggestions of deals being done at $310/t were unconfirmed. Brazil also saw prices moving strongly down by $20/t as Iranian and Venezuelan product (both origins sanctioned in many Western markets) was being sold as low as $310/t CFR Brazil, indicating that other producers such as the Arabs and Chinese, will need to look at export prices of below $300/t FOB if they wish to compete.
Given the supply-demand and production cost fundamentals, our view is that June is likely to be the low point for urea prices this year. This represents an ideal buying opportunity for urea consumers in the Southern African region as cargoes booked in June should arrive in July and August, which is good timing for the upcoming summer season. June is later than usual for the pricing low-point of the year, and gives buyers that missed the <$300/t prices seen in early April a chance to cover their urea needs at a similar price level.
Ammonium sulphate prices fell slightly on the low end of the price spread this week, mostly due to lower prices seen for imported amsul in Brazil. Not much trading activity was seen but the Chinese will be keen to see what sales they can drum up at the IFA conference, given their high amsul stock levels.
CAN prices in Europe were stable again this week as on-farm deliveries are reported to be busy. The threat of urea substitution seems to be keeping a lid on possible price increases. The leading story around Ammonium nitrate remains the struggle of Russian producers to find customers, with the price of Russian fertilizer-grade AN (33% Nitrogen) dropping by almost $25/t this week to sit at $130/t FOB Baltic at the low end of the price spread. In nitrogen terms this equates to $0.39/kg nitrogen versus $0.69/kg nitrogen for urea ex-Arab Gulf. Of course transport costs from the two origins would have to be considered but this is certainly cheap AN for those countries able to use straight AN. Bear in mind that CAN was double the cost of urea on a kg of nitrogen basis just a few months ago.
Ammonia prices appear to have reached a short term equilibrium as the plant outages for maintenance and breakdowns has tighten the market balance somewhat. How long this stability will last is uncertain but most of the unplanned outages have been resolved with those plants resuming production and it is only the scheduled maintenance outages for June that will detract from supply. Overall the ammonia market continues to look oversupplied.
Phosphates
Another rough week for Phosphate producers as prices fall at all benchmark locations
The phosphates market is characterized by unanimous expectations of continuing price declines and the handful of active buyers are using this to their advantage. The DAP price rebound in the USA was short-lived as the price lost more than $100/t this week as the American price moved back into balance with other regions at close to the $500/t level. In fact demand in the USA has dried up so abruptly that traders and producers there are already talking of exporting phosphates as there is no local interest.
The first big Chinese export deal was seen this week as the Chinese sold DAP to India at a price more than $10/t lower than any recent transactions.
South America led the way on sending MAP prices lower, with Argentina buying product $10/t lower than last week and the Brazilians achieving a $20/t reduction. This sent the Saudi benchmark MAP price tumbling below $500/t FOB for the first time since January 2021.
Other regions also experienced falling phosphate values, with European prices falling over $20/t and Moroccan prices dropping by $10-15/t.
Potash
Potash trading activity was very quiet this week as players await the IFA conference next week to hopefully spark some action
In what was a quiet week, the only notable events were prices falling in Brazil by $10/t and by $15/t in South East Asia, where concerns of an upcoming El Nino season negatively impacting agriculture are causing local importers to cut back on their buying.
Most new business was on hold as sellers opted to use the upcoming IFA conference as a reason not to negotiate. With the only direction being down for prices, they had nothing to lose by delaying for a week. European prices are expected to fall with EU potash major K+S expected to issue revised pricing for Europe that is intended to stimulate buying interest.
On the local front, the Rand holding at well above R19 to the Dollar caused the local potash import parity cost to rise slightly this week. The notional Durban CFR value of potash remains around the $450/t mark but there is talk of cheaper potash at closer to $400/t. If this is true, it is almost certainly Russian product and only likely to be available in very small lots.
General Market Outlook
World markets more stable as recent interest rate hikes and economic data are digested.
Brent crude oil remains in the high $70s per barrel as conflicting drivers caused some volatility in the energy benchmark this week. Concerns around the US debt ceiling and China’s weaker than expected macroeconomic data caused some pessimism for oil (and most other commodities) however suggestions of a tighter oil market later this year provided some price support. Brent crude is currently trading at just below $77/bbl.
The European natural gas market continues to recover positively (for EU gas users) with prices now approaching $10/MMBtu. This is still a high number compared to US natural gas but way better than the $100/MMBtu peak seen in August last year. EU ammonia and urea producers are seriously considering restarting their idled plants, despite the low ammonia and urea market prices. The gas price in the US has jumped sharply this week from $2.4 to $2.6/MMBtu – a large percentage rise but still very cheap by global standards.
Maize prices remain under serious pressure as the recent announcement of the US maize crop being 10% up year-on-year is generating concerns of severe oversupply. The CME maize futures were down 4.5% this week on this news. CME soya values also had big drop of more than 5% on the week. The weaker Rand did support local grain prices with maize, wheat and soya marginally up but sunflower was down. These lower crop values are disappointing for SA growers, however much lower fertilizer costs for next season should hopefully soften the blow.
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