Nitrogen
Urea price outlook is unclear for short term as regional supply-demand factors drive regional benchmark prices in different directions
Gas price escalation in Europe has prompted some trader buying to cover their urea shorts – Egypt has been the primary beneficiary of this buying with urea prices there rising by as much as $30/t this week. Overall the view is that Europe is more or less covered for its nitrogen needs for the next couple of months, so events there are unlikely to drive urea prices up substantially across the globe.
The Middle East urea market was the most confused this week, with sales being done at close to $250/t, which is well below the Indian tender price seen last week. On the other hand, we saw transactions at up to $280/t, which led to a very wide spread between high and low prices. Wide spreads are usually indicative of the market price being poised to start moving.
Urea prices in China are moving down and look likely to move down further as increased volumes of urea are expected to be channeled towards exports in the coming weeks. Much of these volumes are expected to be targeted on Latin America, where prices in Brazil have actually risen despite the reductions in other regions. Urea deliveries in Brazil for the upcoming summer rainfall season have not kicked off yet, so the probability is that more urea being traded into Brazil will push prices there downwards into line with other regions.
The short term outlook for urea suggests some price stability for the next few weeks (i.e. prices remaining around $270/t Middle East) while shipments for the Indian tender and other recent trades take place. But in the second half of July, it looks like the urea market may be oversupplied and prices may edge down again, although it is possible that Southern Hemisphere buying kicks in by then and starts to support some price increases. Other than Brazil, most of the Southern Hemisphere countries have delayed their urea imports and time is running short to get the necessary volumes into their farming regions.
May and June usually see around 150,000t of urea being imported into South Africa, which is around 20% of the annual requirement. This year imports for that period are way behind that volume, which means a busy shipping schedule for the next 3 months and certain congestion in Durban port.
Ammonium sulphate prices remain under pressure, with prices coming down a few more dollars again this week. Prices in China are hovering around $100/t for fines and $120/t for compacted granular product, which translates to a CFR Durban value of around $140/t for fines and $160/t for granular.
Higher gas prices have supported European interest in CAN with some late season buying activity kicking in. This has not really impacted on price, with producers seemingly content to leave the price alone and get some sales volumes moving. Ammonium nitrate prices saw some moderate increase this week but from a very low number – interestingly some AN sales of Russian product to Southern Africa (likely Zimbabwe and Zambia being the ultimate destinations) were reported this week.
Ammonia prices were mostly flat this week, with the Tampa price expecting to see a $50+ downward adjustment in the next week or so. This will put serious pressure on the Trinidadian producers, who supply Tampa as their biggest destination, and there are suggestions that the Trinidadians may cut back on production or even idle 1 or 2 plants. Higher natural gas prices in Europe are making ammonia production there uneconomic, thus there may be increased demand for ammonia imports that could provide some price support. Overall ammonia prices are expected to remain roughly where they are for the near term.
Phosphates
A small Indian DAP tender causes Phosphate prices to slide 5% down in most regions this week
With trading activity again very quiet this week, an Indian tender for 50,000t of DAP saw prices drop by over $20/t to India, and this prompted lower prices in other markets. Big buyers remain a rare sight in global phosphates markets and producers appear grateful for whatever business they can conclude.
Prices in China continue to fall as export volumes increase – the Chinese domestic demand for phosphates has largely dried up, so producers are targeting exports.
MAP prices in Brazil declined by $15/t this week on the back of a number of cargoes arriving in the country. This had a predictable knock-on effect on the Saudi MAP price which has now dropped below $400/t for the first time since 2020. More and more industry commentators are talking about the floor price for phosphates, and MAP in particular, being close. From a pure numbers perspective, that is fair comment, but the supply-demand balance remains heavily tilted towards oversupply and while this remains the situation, it is hard to justify the current phosphate price slide ending.
Potash
Global potash prices keep sliding as the Israeli potash producer, ICL, also agrees to the same Chinese contract price
ICL from Israel signed a potash supply contract with its Chinese customers on the same terms as the Canpotex deal reported last week ($307/t delivered). The committed volume is 800,000t to be delivered by the end of 2023, with an option for a further 350,000t. This deal caused ICL to issue a profit warning to its shareholders but at least protects sales volumes in a potash market that looks set for some severe competition between the major producers.
There are reports of the Russian potash major, Uralkali, ramping up its production rates to 95% as it makes good on its intention to pursue “volume over price”. If this does indeed come to pass, the additional tons that this would add to the global market would create further oversupply and depress prices further.
The Chinese and Russian developments have spurred the Indians into renegotiating their annual potash supply contract (they agreed to a price of $422/t in April). This will understandably upset the producers that have contracted with India but with Uralkali looming over their shoulders they will be forced to either accept a lower price or walk away from the volume with no alternative customers in sight.
The price in Brazil declined by $10/t this week, amidst chatter that the Brazilians are starting to believe that the bottom of the potash price is very near and buying interest is predicted to pick up sharply. With a price of $325/t CFR Brazil, it is difficult to see much further downside if the Chinese have locked in millions of tons at $307/t. Whether or not the Brazil price will merely stabilize at current levels or start to rise remains to be seen.
General Market Outlook
Crude oil prices weakening and Crop prices strengthening are welcome news for farmers around the world.
Brent crude oil experienced a volatile week as conflicting drivers prompted a midweek spike to $77/bbl, before negative economic news sent pricing slumping to $73/bbl. Concerns around excessive inflation in most First World countries is sparking increasing fears of a recession, which is impacting on oil demand and thus price. European gas prices remain a focal point for fertilizer markets as European nitrogen production viability is in question. After peaking last week at over $13/MMBtu, this week has seen the TTF price ease down to $11.8/MMBtu. US natural gas prices remained stable at $2.6/MMBtu this week.
Crop futures see a massive rebound this week as US maize and soya prices hit multi-month highs. Worsening growing conditions and forecasts of lower yields in various major producing regions are behind the 8-9% increase week-on-week. There are suggestions that higher maize and soya prices could negatively affect biofuels production and lead to higher crude oil prices. Whatever the knock-on effects might be, this jump in crop values will be very welcome to South African growers busy with harvesting and starting to look ahead to the next season’s planting.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
|
