Nitrogen
Urea market sees some small increases in certain regions but the next Indian tender is expected to slow prices for the coming weeks
The next Indian urea tender was issued this week, which created some expectations of rising urea prices as the Indians were unable to secure their desired volumes in the last tender. However an unusually long delivery window to 10 December means that whatever volumes the Indians buy will not result in a short, sharp consumption of urea stocks as the shipments can be spread out. This has left the market with a less bullish (upward) outlook on urea prices.
Having said that, there was some trading activity this week and prices in Brazil and the Middle East rose a good $15-20/t. While these benchmarks were higher, the actual traded volumes were rather low and prices are expected to stall or even decline if the Indian tender yields the predicted lower values. The Egyptians were able to secure 100,000t of sales to Ethiopia which has eased their stock build-up that resulted from slower than expected European sales.
Our view on nitrogen prices remains largely unchanged – we expect prices to rise through the next three months. The next few weeks may see urea prices stable at current levels or even fall if the Indian tender pushes prices down. But thereafter as the Northern Hemisphere trading volumes increase, urea prices should be supported into the low to mid-$400s.
Latest trade data shows that August urea imports into South Africa picked up hugely as around 8 cargoes arrived during the month. Most of these cargoes came from Iran, underlining the rising acceptance of sanctioned product into the local market. Of course the lower price of sanctioned versus unsanctioned product is the major driver of this trend. Importantly, South Africa’s urea supply for the season is now broadly back on track in line with previous years.
Ammonium sulphate markets were very quiet this week and prices were unchanged from last week. Prices out of China are sitting at $170-190/t depending on grade, which translates to a landed Durban price in the $210-230/t range. Amsul buyers seem to be hesitant to buy due to concerns that a dip in urea prices could cause a $10-20/t drop in amsul. Trade data for the year to August shows that South Africa remains more than 30% behind on amsul imports compared to prior years. International availability of product is good but shipping lead times of 4-8 weeks mean that time is running out for a big surge in imports.
Similarly ammonium nitrate markets have been quiet. Bids to buy AN are well below the current market price level, so sellers are sitting tight. CAN interest has been evident in Europe but the price ideas are 10% below the present market price. With local LAN production at both Omnia and Sasol looking well below historical levels, the domestic market is likely to be short of LAN/CAN. Usually a few cargoes are imported around June-July but only one cargo has arrived so far this year.
Ammonia prices remain strong as the market has been coming to terms with the recent escalation to almost $600/t. The Middle East was the only benchmark that showed much change, with a $30/t increase taking that price to $550/t fob. The outlook for ammonia is strong with supply availability quite tight and demand continuing to be solid.
Phosphates
Differential between MAP and DAP prices narrows as MAP availability tightens.
MAP prices rose $15-20/t this week driven mostly by Brazil – the price increase resulted from limited spot availability of MAP to meet some small enquiries from Brazil, Overall, phosphates demand remains weak in Brazil but short terms buying events can spark prices like this.
On the flip side, DAP prices fell slightly in India and the USA. DAP sales into were strong this week with sellers happy to accept $5-10/t discounts to generate sales – the revision to the Indian phosphate subsidy has still not been announced by the Indian government, which is likely to slow down DAP trade into India substantially unless the price is much lower. Traders are therefore keen to take deals close to current levels rather than gamble on the outcome of the subsidy revision. DAP is still about $50/t higher than MAP so there is ample scope for prices to converge further.
As we’ve been harping on for months, the MAP supply situation in South Africa is dire. Product is completely sold out and numerous local retailers are unable to get hold of any stock. The trade statistics show that MAP imports to the end of August were about 45% behind the same period last year. Foskor continues to stumble along but its production is not stellar as it has been struggling for ammonia raw material that has limited its MAP production. A combination of infrastructural issues and operational and planning incompetence is behind this. The SA market needs around 80-90,000t of MAP promptly just to be in balance.
Potash
Potash prices remained stable at all major benchmark locations this week
Potash prices were unchanged this week as the combination of seasonal weak demand and the ongoing undertone of lower pricing limiting trading activity. Possible pricing changes were penciled in for South-East Asia following a number of palm-oil plantation tenders. However palm oil prices have been falling and El Nino is already impacting rainfall in the region, thus buyers bought the bare minimum and argued for lower prices.
Trade data to the end of August shows that South African potash imports were more than 35% behind prior year volumes for the same period. Some cargoes have arrived during September but the situation is still quite tight. It is only the late onset of spring rains that has avoided a stock-out of potash.
General Market Outlook
Weak demand causes Brent oil prices to fall sharply. Rand keeps losing ground to the Dollar.
Brent crude oil shed more than $11/bbl this week as signs of poor demand keep emerging. The price fell from $96/bbl a week ago to trade at $83.6/bbl today – despite the efforts of the major oil producers to cut production and push prices up. Dollar strength against other currencies added to the downward pressure on oil prices. The European TTF gas price seems to be stabilizing around the $12/MMBtu level after recent production issues with some EU gas fields. US natural gas prices carried on moving up, touching on $3.2/MMBtu due to US gas demand surprising on the upside.
The Rand weakened further against the Dollar, lead mostly by the Dollar strengthening against most other currencies. The Rand opened the week in the high R18s but rose to R19.60:$ by the middle of the week. It looks set to end the week at R19.20.
The weak Rand has helped some of the local grain prices. Maize enjoyed a rare up-turn this week, rising 1.8% on the CME – on Safex, maize rose around 3% with the currency effect assisting.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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