Nitrogen
Urea and other nitrogen prices are dropping on the back of the Indian Urea tender. How long before prices resume their seasonal upturn?
With the dust settling on the recent Indian Urea tender, urea prices have been falling across all benchmark locations. The Indian resulted in 1.76 million tons of urea being booked against a targeted volume of 1 million tons – which indicates the numbers of offers and the eagerness of the sellers to take the price that the Indians counter-offered. The Chinese secured 1.1 million tons of the tender, thus they will shift their stock position over the next month. As we speculated 2 weeks ago, the vast amount of product being offered to the Indians pointed to producers/sellers sitting on big stocks and with the tender now over, that product is being sold actively, which is pushing prices down.
At a global level, we are at least one month and perhaps two months away from seeing the Northern Hemisphere seasonal buying start kicking in. The urea price may well drift without a clear direction during this period because the Brazilian importing window is close to over, meaning limited new purchases from South America. Australia and South Africa are still actively buying but their combined outstanding volumes will absorb a week or 2 of production of the big urea export producers – which leaves the urea supply-demand balance tilted towards oversupply for a few weeks.
The Middle East urea price fell around $20/t this week as producers try to attract buying interest. With the Brazilian import market likely to be quiet for the next few months, prices there dropped sharply by $30/t.
Ammonium sulphate prices have been falling steadily as the lower urea price undermines the value of nitrogen. Prices have declined by around 10% over the past few weeks as supply remains strong and buying interest a little more cautious as buyers hold back to see if lower prices are around the corner. The recent slump in grain prices hasn’t helped farm economics and the big agricultural areas in Brazil and Argentina that are due to plant shortly have been conservative on the volumes of fertilizers that they’re buying at present.
Falling urea values have impacted Ammonium nitrate prices as well. With Brazilian demand shrinking, the Russian AN exporters are struggling to find any takers and AN prices are heading down quickly – the $300/t prices of a few weeks are out of the window and $250/t is where buyers are prepared to engage. CAN prices have also shed around 10% in recent weeks as the European season is over.
Ammonia prices remain stable although upwards pressure appears to be building. Ammonia supply is tight with a number of larger export producers currently down for various reasons. Lack of demand seems to be holding prices back but with the rise in ammonium phosphates prices, it looks like ammonia prices surging up cannot be too far away. The only ammonia trade of any real significant was the Nutrien (USA) purchase of a cargo from Ma’aden (Saudi) for $400/t, which represented a $90/t increase over last week’s price.
Phosphates
Phosphates prices may be reaching a plateau as the price surge has attracted more supply and buyers begin to resist higher prices
Speculation is mounting that phosphates prices may soon run out of momentum. Higher prices have seen Morocco joining in the action selling large volumes after months of minimal exports. The Chinese exhausting their Q3 export quota raised concerns that supply from that origin would be limited but Q4 is now just a month away and Chinese exports may begin to pick up again in the coming weeks if quota is freed up by the government. The downward reset in crop prices over the last month has also impacted phosphates demand and buyers are now reining in their volumes.
The Indian DAP price remained flat at $560/t CFR this week, with at least 4 50,000t cargoes being booked from Morocco. Indian prices have risen by $120/t in the last 4 weeks. DAP prices across the other global benchmark locations were also flat this week – perhaps a signal that the price surge is running out of steam.
MAP prices have managed to keep rising, with the Saudi price approaching $500/t FOB this week. MAP has not climbed nearly as rapidly as DAP and now lags DAP by a good $50/t, which may be why buyers have been prepared to accept $10-15/t weekly increases in recent weeks. But if DAP prices do start to fall in the coming weeks, MAP is certain to be impacted.
Potash
Potash prices return to stability in recent weeks as Southern Hemisphere buying interest slows and Northern Hemisphere buyers are yet to enter the market in force
Overall, potash markets are looking flat at the moment with some small ups and downs in various markets canceling each other out. This week saw China buying unexpectedly, which pushed prices there up by a few dollars. On the flip side, demand from Brazil is getting quieter day by day.
Potash producers targeting Brazil will be hoping the maize prices improve during the 4th quarter, which would likely encourage more buying interest in Brazil. Without this, Brazil may well remain out of the international potash market until mid-Q1 next year when their Safrinha season will start. Brazilian potash stocks remain very high by historical standards so they will not be under major pressure to buy for the rest of this year.
A little bit of early buying has been seen in Europe as players take small positions to reduce their supply risks if they have a repeat of last winter, where availability became very tight. Meaningful European buying for their stocking programme does not usually kick in before October.
Crude Palm Oil futures dropped in South East Asia this week – with palm oil being the major driver of potash consumption in that region, potash demand and thus prices are easing off.
The Durban import price of $390-395/t CFR has remained stable for the last few weeks. A 15,000t cargo of granular potash has been booked for Beira at a price of $405/t CFR, which will service Mozambique, Zambia and Zimbabwe.
General Market Outlook
Rand weakness is creating increased economic risk for Growers looking at the season ahead.
Brent crude oil continues to sit in the mid-$80/bbl range – prices approached $85/bbl earlier in the week and look set to end at around $84/bbl. The European TTF gas prices are keeping European fertilizer producers on their toes as it remains extremely volatile – this week the TTF approached $14/MMBtu earlier this week until the threat of a strike at a major Australian LNG site was averted. Since then the TTF index has dropped sharply to $11.7/MMBtu. US natural gas prices seem to have ignored the hype and held steady at $2.5/MMBtu.
Grain prices remain a serious concern for growers as decisions need to made around for the upcoming planting season around yield targets and thus fertilizer application rates. Looking at international CME prices for maize, soya and wheat over the past month, these have all registered declines of 11% or more. The weak Rand has offset a lot of this impact thus the Safex values are only down 3-5%. But this masks the problem that the weak Rand is having on farm economics because all of the inputs (fertilizer, fuel, chemicals and seeds) have been negatively affected (made more expensive) by the weak Rand. Our index tracking tons of maize required to pay for a ton of fertilizer was at 2.1 at the end of July – it is now 2.6 t maize per ton fertilizer, which shows how fertilizer affordability has worsened by 20% in the past month (for maize).
There is also the negative climate outlook with the risk posed by the current El Nino tendency, especially for late summer rainfall projections to be below-normal. The rainfall forecast for the western summer rainfall areas is also looking poor.
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