Nitrogen
Bearish tone throughout the Urea market but a new India tender may send prices rising
The latest Indian urea tender yielded far lower volumes than targeted, thus speculation is rife that a new Indian tender could be issued soon, possibly even today (Friday 29th). The talk is that such a tender would seek at least 1.5 million tons. If all of this comes to pass, the expectation is that this tender would push urea prices up – mainly because the Chinese are unlikely to participate in huge volumes, leaving the remaining urea exporters, who are busy with their Q4 plans for the Northern Hemisphere, to provide the volume.
Prices this week mostly drifted slightly down – prices in China, North and South America were all lower by around $5/t. Trading volumes were thin, so the price movement is not hugely significant. Egyptian sales did pick up, which may be a sign that European Q4 buyers are starting to come to the market. Egypt has been trading at >$30/t above the Middle East and the Egyptian price has been sliding downwards in recent weeks, which may also have contributed to the increase in sales.
The Middle East price was unchanged as no spot transactions were reported this week. Various contract cargoes to India and the Americas took place. A number of Middle Eastern producers are now starting to make noises about being sold out until the end of November or even until the end of the year. Given the relatively weak global urea demand, we struggle to take this too seriously – it is more likely a tactic to try and support higher prices as Q4 approaches.
There is a steady stream of urea cargoes now heading towards our shores that should arrive between now and mid-November. Despite prices from ‘sanctioned’ origins such as Iran and Russia not being much lower than the Middle East price (on a delivered Durban basis), there are a number of Iranian and Russian cargoes destined for the Southern African market.
The lack of activity in the nitrogen market flowed over to Ammonium sulphate too. Buyer interest from Brazil was reported as increasing but there were no meaningful deals done that impacted price. Chinese exports of amsul continue to flow, with Turkey securing 75,000t at prices reported to be below ‘market’. Chinese exports for this year are approaching 8.5 million tons, a good 20% higher than last year. This volume alone indicates that the amsul market is well-supplied and any price increases will need to be led by urea prices rising, rather than by the amsul market becoming tight.
Ammonium nitrate prices were predictably stable too, with low-ball offers from the Brazilians for Russian AN being rejected. CAN prices were reduced in Europe to try and attract some late season interest but there were no takers.
The Ammonia market saw the most action by far this week, with some overdue price adjustments. The fortnightly Tampa contract price was revised by a hefty $185/t upwards to leap from below $400/t CFR to almost $600/t. Considering that most of the ammonia sold into Tampa goes into MAP/DAP production, this price movement should get the attention of phosphate traders because it will have a large impact on ammonium phosphate production costs in the USA. The Asian market remains very tight with spot cargoes being scarce – sales out of the Middle East were up by $50/t and unconfirmed prices in Korea and Japan indicated that buyers are paying north of $700/t CFR for ammonia.
Phosphates
Phosphates market is quiet as major players await confirmation of revisions to the Indian Fertilizer Subsidy.
Trading activity in the phosphates sector was very quiet this week, with minimal spot sales being done. The Indian government is expected to announce a revision to its Nutrient Based Subsidy scheme. Because of the cost of this scheme to the Indian fiscus, the government has decided to reduce its contribution to phosphates and potash in particular. The reduction in the subsidy will mean a reduction in what Indian importers can afford to pay for imported MAP and DAP – the immediate impact is likely to be a drop in purchase volumes and to some extent the price because of the importance of Indian purchases in overall demand. Cutting subsidies is a delicate act for the government because reducing imports leaves their agricultural sector at risk of fertilizer shortages.
The handful of phosphate transactions done this week yielded increases of a few dollars in markets such as India and China. Most other benchmark prices were unchanged. China is expected to have around 1 million tons of DAP and 0.5 million tons of MAP available for export during Q4 – which is roughly in line with what it exported in Q4 2022 with some government restrictions in place. Phosphates producers are all talking prices up using the argument that supply is tight (of which there is little evidence) and demand is expected to pick up during Q4 (again, not much support that demand is more than average at best). The poor forecast for maize prices in particular is negatively impacting phosphate demand in the Southern Hemisphere, and the same is likely to apply for the Northern Hemisphere in the coming 6 months, unless crop prices improve.
Potash
The Potash sector maintained its recent trend of stability this week
The major potash-consuming regions at this time of year are Brazil/Latin America and South East Asia and both regions are showing slow demand at present.
As mentioned in the phosphate section above, an expected revision to the Indian subsidy scheme is likely to reduce the amount of subsidy applied to potash imports to India. While the reduction in subsidy will substantially reduce the margins for potash importers, the main contribution to the existing healthy margin was the renegotiation of the annual Indian potash contract price from $422/t to $319/t. Thus the proposed reduction on the potash subsidy is merely bringing the importer margin back in line with where it was earlier this year. Minimal impact is expected on potash demand in India and Indian buying patterns.
In other markets there is very little to report this week – no price changes, no meaningful trading activity and no surprises. Let’s see how long this quiet period lasts!
General Market Outlook
Oil prices remain firm and look set to remain high.
Brent crude oil hit a 12-month peak at $96.5/bbl on Thursday before retreating back to $96/bbl today. The reason for this rise has been strong oil demand and US oil stocks are at their low level in 15 months. Oil prices are expected to remain at these levels until OPEC+ elects to raise production levels. Outages in Norwegian natural gas fields sent the European TTF gas price leaping up once again, touching on $14/MMBtu earlier this week. US natural gas prices climbed to $2.9/MMBtu as October approaches – October is the start of ‘winter’ gas price futures and usually sees increased gas demand and thus higher prices.
The Rand bounced around this week, peaking at R19.25 on Thursday before recovering back into the high R18s.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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