Nitrogen
International urea prices move down on the back of the low pricing achieved in the Indian tender
The tender prices for last week’s India urea tender were opened this week. The lowest number was around $400/t CFR India, which is what the Indian’s counter-offered to all the participants in the tender. Just over 500,000t of urea was confirmed at this price, meaning that the suppliers of the remaining 3.3 million tons offered in the tender were not prepared to accept that price. The Indians were looking for 800,000 to 1 million tons, thus will end up short of this target. Speculation is rife that the Indians will issue another tender soon – a good indication that the Indians hold the view that urea prices are set to rise in the coming few months.
Most of the confirmed supply under the tender is coming from the Middle East, where the tender price equates to around $380-385/t. A lot of Russian urea was offered but with freight rates from Russia to China >$75/t, the netback from the tender would leave the Russian urea price at just above $300/t – this is $40-50/t lower than current price levels, hence most of the Russian volumes not accepting the Indian counter-offer. It was a similar story from China – the netback price would mean a $30/t reduction in Chinese prices. With the Chinese government tightening exports of urea, none of the traders with urea positions were interested in taking a price hit.
Other regional markets were generally quiet – some sales of Egyptian urea into Europe took place, but not much movement on the Egyptian price. Trade into South America remained quiet and the Brazilian price was unchanged.
So where to now for urea prices? The onset of the Northern Hemisphere buying season is not far away, which will definitely support demand. The closure of the Mississippi River system (due to low water levels at the end of summer) takes place in October-November, which slows a lot of US trading activity via NOLA (New Orleans on the US Gulf coast) during that period. There may be some Southern Hemisphere demand for top-dressing but with grain prices looking lacklustre and Southern Hemisphere fertilizer demand having been average-to-poor so far, it doesn’t seem likely that a huge amount of late season demand will emerge from Latin America, Southern Africa and Australasia. The conclusion of these elements is that we expect urea prices to drift at current levels for next few weeks, but from October prices should strengthen gradually through to December/January. Given that urea is already at the $400/t mark, prices in the low to mid $400s during the next quarter should be anticipated.
Ammonium sulphate prices were generally firm this week as traders seem to be pinning their hopes on upward movement in urea prices supporting higher amsul numbers. An outage at a major Chinese amsul producer added to the higher price sentiment but until/unless Brazilian demand for amsul improves in the short term, there’s not a huge amount of upside on prices above current levels.
Brazil continues to impact the Ammonium nitrate market too, as exporters from the FSU drop prices in an effort to generate sales. So far the Brazilians are standing firm and not buying significant volumes of Russian AN and there aren’t too many alternative markets looking for product right now. In the EU, some CAN suppliers are trying to raise prices on the grounds of ammonia costs rising but this is ensuring that already-reluctant buyers are sitting tight.
Ammonia prices keep moving steadily up with most of the trading action being in the East (Asia). Price in the Middle East and Far East gained $20-25/t this week. Availability of ammonia in North America and Europe is said to be tight but demand is in a seasonal lull, so little trading is happening in these regions.
Phosphates
Phosphate price outlook is quite firm although cuts to the Indian Fertilizer Subsidy will probably cause prices to tank.
Indian demand for phosphates remains strong as buyers are replenishing stock. The Indian DAP price gained $5/t achieving $600/t CFR India. There is a lot of noise in the market about international phosphate prices continuing to strengthen however we would caution against too much bullishness. Firstly Q4 is normally something of a seasonal lull for phosphates and secondly the Indian government is revisiting its subsidy scheme for P and K for the Indian Rabi season that begins in October. The reduction in subsidy being considered is allegedly between 25-30%, which would translate to a DAP price of around $500/t CFR India – a good $100/t lower than current market prices. Thus there are some bright warning lights flashing for phosphate prices in our opinion.
MAP prices went nowhere this week as demand in Brazil remains non-existent, which is counter-balanced by the Chinese putting the brakes on their exports. A high-level estimation of production versus sales for Morocco and Saudi indicates that both should have quite a bit of available product for the rest of September and October..
On the local front, there is good reason to expect MAP prices to keep rising. The domestic market is extremely short of product and both importers and Foskor have very limited product available. There is minimal MAP scheduled in the import lineup and the lead time for a new cargo is a good 8 weeks, which would mean end of November arrival all going well. In reality such an import would probably sell quickly at that time of year (likely to be peak planting season) and generate good profits for the importer – however very poor demand over the past 3-4 months is discouraging importers as they simply do not want to take the risk of unsold product.
Potash
Potash markets are balanced, with adequate international product availability and demand being fairly steady
There was very little new to report in the potash this week. Prices were unchanged as supply and demand seem well-balanced and not disturbances to the current equilibrium are foreseen. There is a reduction expected in the Indian government subsidy on potash but this is in line with the revision applied to the Indian potash contract price (being renegotiated to $319 from $422/t CFR India). The proposed subsidy cut will not change the economics around potash imports to India and no real change in demand is thus expected.
In Brazil, demand for fresh potash imports remains quiet. The main soya plantings have begun in earnest through Brazil – with soya the best performing grain or oilseed in recent months, there is hope that the Brazilians plant close to record acres and potash application is high. This should use up a big portion of the record potash inventory in Brazil and open the way for renewed potash imports towards the end of the year.
On the local front, there remains an arm wrestle between buyers pushing for lower prices in line with Brazil and the importers holding out for sales closer to $400/t. For now the price is unchanged at just below $400/t CFR Durban.
General Market Outlook
Commodity and currency markets remained stable this week.
Brent crude oil held steady at $94/bbl this week as the oil market experienced a rare week of stability. Some of the leading market commentators are talking about oil price forecasts for 2024, with Brent crude being projected to average $1000/bbl next year. Natural gas markets were also stable; in Europe the European TTF gas price remained in the $11-12/MMBtu band, where it’s been for the past 3 weeks. US natural gas prices were likewise steady at $2.7/MMBtu.
The Rand had a calm week too, remaining at just under R19 to the Dollar. Crop values were generally a bit soft/down this week as both CBOT and SAFEX values showed small declines. The outlier has been wheat, which peaked earlier this week on Safex at above R7,000/t. Low international wheat stocks and poor yields have been supporting wheat prices locally and abroad.
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