Please note there will not be a report next week (18 August).
Nitrogen
The Indian urea tender surprised the market with lower-than-expected prices – will this slow the upward price trajectory?
The latest Indian Urea tender closed earlier this week and delivered a few surprises. Firstly, the price was a good $20/t lower than predicted, settling just below $400/t CFR India. This netted back to around $380/t FOB Middle East and $375/t FOB China. A smaller surprise, given the market gossip about how tight producers are on inventory, was that 3.4 million tons of urea were offered. The Indians indicated that they were looking for approximately 1 million tons, so the tender was more than three times over-subscribed. Hardly a message of product availability being limited.
A sharp 35% spike in European gas prices raised concerns about European buyers returning promptly to the market, especially in light of the supposed shortage of urea. No European buying interest materialised which suggested that there is no meaningful shortage of product at this late stage of the season and perhaps buyers are unconvinced about the strength of urea prices going forward. Egypt, who is usually the first choice supplier to Europe, reported no sales this week.
Predictably urea prices in other major markets fell substantially on the news of the Indian tender. Prices in Brazil dropped $30/t and US barge values dropped $45/t. With seasonal lulls fast approaching for both markets, nobody is keen to be stuck with high priced positions.
Where do these latest developments leave urea prices for the next month or so? The Northern Hemisphere surge in demand for Q4 can be expected to lift prices from October. But for August and September we may well see relative stability in pricing. Once the dust settles on the Indian tender, our feeling is that many producers will be looking for sales but will be cautious about over-selling and sending the price tumbling again. A urea price in the mid to high $300s looks about right (i.e. $350-375/t FOB Middle East) for the next month or so.
The about-turn in urea prices caused Ammonium sulphate prices to give up much of their recent gains. Granular product dropped almost $10/t and crystalline amsul declined almost $20/t. The recent surge in amsul price has encouraged buyers to be cautious and sales volumes have shrunk this past week. With the Brazilian import window closing, prices in Brazil dropped by $30/t this week as sellers chase buyers.
Ammonium nitrate prices stabilised this week after urea lost all momentum – it seems likely that AN will soften a little in the coming weeks until urea prices stabilize. CAN prices were unchanged this week.
Ammonia prices were flat this week – the market appears tight with a number of producers suffering outages but the urea price drop may have caused ammonia buyers to hold back in hope of ammonia prices being affected. The EU gas price jump this week would also point to European ammonia production being cut back in favour of cheaper imports but as yet, no new import purchases have been seen.
Phosphates
Phosphates prices climb rapidly as availability from China tightens and buyers act quickly to cover
It was active buying from India that kept DAP pricing heading upwards this week. There was no confusing the price direction as the Indian price leapt by $70/t to rise above $500/t CFR. The Chinese DAP price rose by close to $75/t as concerns about Chinese supply are clearly rising.
Other importing markets showed more modest increases, although a $20/t increase in the US and Europe is certainly considerable. Buying activity has picked up across most regions.
The Moroccans enjoyed a second week of decent sales, with over 200,000t of phosphates reportedly being sold to South America and Europe.
Despite the lateness of the season, Brazil was prepared to pay an extra $20/t for MAP prices with prices there now above $500/t. The window has now closed for exports from China to reach Brazil in time for the soya planting season so prices in Brazil may start to quieten.
The Indian quarterly phos acid contract price was finally settled this week – the final number was agreed at $850/t CFR India for 100% P2O5 concentration.
Opinions remain divided on the direction of phosphates prices for the rest of the year – there is a school of thought that prices will resume their decline by the end of the year because demand overall remains rather weak and farm economics aren’t looking great. But for the short term at least, phosphates look set to remain high.
Potash
Potash prices edge up slightly in Brazil and the US
The US led potash markets this week as their summer fill programme (stocking up for next spring before winter impacts Canadian exports and US distribution in the Corn Belt) picked up speed. The Canadian port strike now seems to be over thus supplies are expected to resume.
Late season purchases into Brazil supported another $5/t increase with the Canadian strike possibly adding some support to sellers.
As a counter to the recent upward movement in potash, a tender in South East Asia saw 300,000t being sold at a price of $306/t CFR, which is the lowest price seen this year in any region. This deal will give encouragement to other big buyers that low prices are still obtainable.
A 40,000t cargo of granular potash was reportedly sold to South Africa this week, at a price of $390/t CFR. This is broadly in line with the current price level in Durban.
General Market Outlook
Rand keeps weakening as Crude Oil price strengthens.
Brent crude prices firmed this week as production cuts seem to be taking effect – the price rose from $84/bbl to end the week at $86.7/bbl. There is a fair bit of talk about raising the forecasts for oil for the rest of 2023 and for 2024. The European TTF gas price jumped sharply this week, bouncing from $9.5/MMBtu to approach $13/MMBtu as concerns over strikes at Australian LNG sites sent concerns throughout the global gas market. US natural gas prices reacted too, although to a much lesser extent, finishing the week at $2.8/MMBtu.
The Rand remained weak this week losing another 1%, briefly rising above R19 to the Dollar and looks set to end the week around R18.8:$.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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