Nitrogen
Nitrogen markets were surprisingly quiet given Middle East political events – prices are seen as mostly stable to slightly down
The urea market was generally calm this week, with limited spot trade and prices not really moving in most benchmark locations. The Indian urea tender does not close for offers until 20 October, this it appears that there won’t be massive price movement until the tender offers emerge.
Gas prices spiked in Europe again this week but had no immediate impact on nitrogen prices there. In fact Egypt, which primarily targets Europe for urea sales, dropped its price and this did not generate any up-tick in sales, highlighting the poor demand in Europe.
US urea prices fell quite sharply due to ample product availability and limited time for delivery of any prompt sales because the closure of the Mississippi River system is due in a matter of days. With American demand for fertilizer application now zero, there will be some sharp price swings up and down as traders begin the winter refill programme and positions are built and sold.
Urea trade in Brazil was quiet and offers at current price levels of $$10/t CFR were firmly rejected and indications are that buyers would not pay more than $395/t. This would suggest a Middle East price in the $360-380/t range rather than the present price of $400/t. The Indian urea tender will give a strong steer on Middle East prices in a week’s time.
Granular Ammonium sulphate prices have firmed this week as Brazilian demand picked up – prices for granular amsul rose in both China and Brazil. Standard/crystalline product prices remained unchanged. Amsul buyers are watching urea price developments closely – if urea prices rise then they will move quickly to buy amsul before its price moves up as well.
Ammonium nitrate was predicted to move up as the EU gas price rose sharply again this week but the AN price has remained static – again, this is symptomatic of absent demand. Brazil continues to buy moderate volumes of Russian AN, which remains quite cheap because of the limited AN markets available to it.
The Ammonia market was quiet this week as players continue to absorb the recent leap in prices. Asian demand is viewed as being strong and it is a shortage of supply that is restricting trade. The second Ma’aden ammonia train is expected to restart production soon, which will free up more than 3,000t/d of supply, so Asian trade should pick up speed. The gas price spike in Europe has rendered domestic production of ammonia uneconomical for Europe, thus an increase in EU ammonia imports can be anticipated in the short term.
Phosphates
Phosphate prices were mostly stable this week, with a few regions showing small increases.
MAP prices continue to be supported by Brazilian buying, where the lack of MAP availability is pressuring buyers to accept higher prices. A similar situation is playing out here in South Africa where there is no MAP to be had and retailers are getting desperate to get hold of product. Unfortunately this is not an unusual scenario in season time – until the industry starts to be more proactive around buying earlier, buyers with a ‘just in time’ mindset will remain exposed to the risk of stock-outs and huge local price premiums being demanded.
DAP prices remain paused while all the major players wait for the announcement of the revised Indian Nutrient Based Subsidy scheme. It seems almost certain that the revised scheme will cause demand to drop, the question is more by how much demand will drop. Europe saw some rises in DAP prices as there is a shortage of available product – with a big tonnage booked from Morocco, this situation is likely to ease in the coming weeks.
In the US MAP closed the gap on DAP prices as the US season transitions from application, which is now complete, to restocking for next spring.
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Potash
Potash prices were unchanged again this week – although the Israel conflict is a red flag for supply
Potash prices remain locked at current levels around the world. Producers are anxious to push numbers up and buyers feel the opposite. It appears that prices are coming under downward pressure in Brazil as buyers are indicating they will only consider prices $10/t below the present level. With a few months to go before the Brazilians need fresh stock, it seems that the buyers hold the upper hand.
The Dead Sea region is the major potash production location for Europe and Asia – both Israel and Jordan produce potash from the Dead Sea and Israel is the 4th largest producer in the world. This latest conflict is therefore a red flag to potash supply – there is no indication at present that production is impacted in any, but if an extended war develops then there is a significant prospect of supply disruption. Given the experience in the Russian war where many commentators, including us, expected supply to become a real problem, we don’t anticipate a huge shortage any time soon nor prices going through the roof. But the risk of both shortage and price spikes is much higher.
General Market Outlook
Brent crude oil rebounds on news of Middle East conflicts but not as much as expected.
Brent crude oil looked set to fall to $80/bbl a week ago and then the Israel-Gaza conflict erupted last Saturday . The price climbed to $88/bbl in a knee-jerk reaction and seems to be settling just below $90/bbl. Of course the Middle East region is hugely significant in global oil supply, so the twists and turns of the conflict will cause a lot of uncertainty in commodity markets and big price spikes cannot be ruled out. Apparent sabotage to a European undersea gas pipeline in the Baltic Sea, allegedly by the Russians, has prompted a large leap in the European TTF gas price. The TTF price jumped from $12/MMBtu to hit $15.5/MMBtu, prompting concerns about European nitrogen fertilizer production viability. US natural gas prices remained steady at $3.2/MMBtu as stable inventories counter-balanced increased demand for gas due to cool weather in the US.
The Rand strengthened by around 2.5% which lowered the import parity values of all the fertilizer segments, given they were unchanged in Dollar terms this week.
The general bearish outlook returned to global grain markets again this week, with most grains and oilseeds heading down. Soya remains the best-performing row crop. On the local front, Safex prices also suffered this week.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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