Nitrogen
Urea price continues its upward recovery as the main regional markets look fairly balanced for the next few weeks
The urea price solidified its rebound this week with most regional prices showing higher numbers. In general suppliers are satisfied with their recent sales and do not feel under pressure to concede on price to chase tons. Buyers equally feel well-covered and are mostly sitting back and watching the handful of active buyers being forced to pay higher prices.
The price leaders this were Egypt who saw prices rise to $370/t, driven by traders looking for proimpt cargoes for Europe. Middle East prices were supported by strong purchasing from Australia and Brazil. The Brazil price rose by almost $30/t to hit $335/t – this supported the $18/t increase in the Middle East spot urea price, which rose above the $300/t level.
The upcoming Indian urea tender remains a key source of demand for July, with around 1 million tons up for grabs and the Chinese and Middle Eastern producers expected to be at the forefront to compete for the volume.
Some trade data for urea imports into South Africa for the January to May period came out this week – SA imports were 20% down year-on-year at 155,000 tons. This reinforces our point over the past few weeks that local urea import activity is getting very late for the season and the risk of port congestion and demurrage costs being incurred is rising by the day.
Ammonium sulphate kept following in urea’s slipstream with prices rising around 10% this week. The amsul sellers are looking to Brazil to keep buying but there already seems to be a reaction to the price movement with buyers starting to pushback. With the Southern Hemisphere purchasing season now underway, the urea price trend will be the lead indicator for amsul – if urea prices keep rising then amsul is likely to follow. Amsul imports into South Africa for January-May were 30% behind the same period last year.
After a flurry of trading activity in the past few weeks, ammonium nitrate and CAN markets have calmed down. With urea dragging nitrogen values up, nitrates would be expected to follow thus the lull in trading and flat pricing is unexpected. It may be due to a combination of the Northern Hemisphere season drawing to a close and perhaps buyers are waiting to see if urea prices backtrack and nitrates prices could under pressure again.
Ammonia prices are still bucking the urea trend and have fallen again this week. The Western Hemisphere market is considered to be weak and prices remain under pressure. The Eastern/Asian market looks a little firmer although that is due to a few plants being down rather than demand picking up.
Phosphates
Phosphate market still trending down slowly, as prices between most major regions converge with each other
Most regional prices headed moderately down this week, although Brazil was the outlier and saw a $5/t increase. DAP prices in almost all regions seem to be settling around the $430-440/t level right now. The exception is Europe where prices remain much higher at close to $600/t. The European market is an outlier due to a number of factors – firstly they are avoiding Russian product, which leaves them having to buy from more expensive origins. Secondly, their very strict heavy metals legislation rules out a number of potential lower cost suppliers. Furthermore phosphates demand in Europe is very weak (which the high prices are contributing to) which means that the opportunity to replace expensive stocks already in the region with cheaper fresh imports is minimal.
News out of China indicates that Chinese phosphate producers are steadily increasing their production rates, a move that will increase exports and add more downward pressure on already-fragile phosphate prices. Indian buyers have been quick to pick on this trend and took advantage to achieve prices reductions of around $15/t, lowering the Indian import prices to 440/t.
The Indian quarterly phos acid contract price has still not been officially settled. Somewhat unexpectedly, the main Jordanian phos acid producer announced that it had agreed a price of $900/t for Q3 with the Indians. This is $50/t higher than the price agreed by a different producer last week. Exactly where the price will land is anyone’s guess but the other phos acid players are likely to target the higher number.
The increase in MAP in Brazil this week was put down to decent demand emerging for their summer rainfall season. However MAP stocks in Brazil remain exceptionally high and with world phosphate prices likely to keep drifting downwards, we expect the Brazil price to keep moving down towards the $00/t level from the current $435/t.
MAP imports into South Africa are way down on prior years – the January-May period shows that only 40,000 tons of MAP came into the country versus 67,000 tons for the same timeframe last year.
Potash
Potash prices were unchanged in all regions this week, other than Brazil which saw a small increase
Brazil is the most buoyant force in fertilizer markets at the moment – the outlook for soya prices globally and particularly in Brazil have helped spark demand for potash. The Brazilian potash price gained another $5/t this week.
All other potash markets showed unchanged pricing this week. The shock Chinese contract price of $307/t achieved a few weeks back is still playing through the market and while oversupply persists, it is difficult to see most regional pricing doing anything other than tending towards the Chinese number.
The Indian renegotiation of their potash contract price is still unfinished but the odds are high that they will succeed with getting a number on the low $300s. If not, they will probably just revert to spot buying and with so much potash availability, there is no risk in such a strategy.
Potash trade data for January to May into South Africa showed that imports are at only 50% of the volumes for the same period last year (when prices were at their peak of $1,125/t CFR Durban). Just over 50,000 tons had been imported by end-May out of an annual demand of around 400,000 tons. The alarm bells are ringing loudly on the local availability of potash for the upcoming summer rainfall season.
General Market Outlook
Cereal prices are under severe pressure as crude oil prices start to strengthen.
Brent crude oil showed a resurgence late in the week as prices rose from $75/bbl to end the week at $78.5/bbl. The announcement by both the Saudis and the Russians of oil production cuts raised fears of tightening supply and this was behind the price surge. Looking at natural gas markets, the EU TTF price eased down marginally to $10.3/MMBtu and the US natural gas price closed as $2.5/MMBtu.
The Rand weakened by almost 2% against the US Dollar this week, rising above R19 to the dollar. As always, this forex decline caused local import parity values for fertilizer to rise.
The international CME crop futures values showed substantial fluctuations this week. CME maize dropped 14% to fall below the $5.00/bushel (approx. $200/ton) for the first time this year. Safex maize numbers also declined but by much smaller margins, which suggests further falls are likely as it aligns with international prices. Safex maize is now trading in the R3,500/ton range. Wheat prices are also looking vulnerable as excellent harvests are anticipated in Russia, the EU and India.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
|
