Nitrogen
Urea prices stable this week as Nitrogen markets pause ahead of the June Indian tender
Urea was once again very quiet this week, after a few weeks of fairly busy trading. As mentioned numerous times previously, this is a very quiet period in the year in between the Northern and Southern Hemisphere buying seasons. Those buyers requiring product have covered their needs for the most part and everyone else is prepared to play the waiting game with some confidence that urea prices are not going to catch them out. The main global industry event takes place towards the end of May, where the main producers, traders and distributors will all be meeting, so most price negotiations will be on hold until then.
Where urea was traded, prices did slide down a couple of dollars but nothing substantial enough to suggest a price trend or direction is emerging just yet. The major producers are mostly under no pressure to sell just yet: the Arab Gulf producers are waiting for the next Indian tender expected in June. The Chinese producers are reluctantly looking towards exports as their domestic demand ends but international prices are below their local netbacks, thus they also are prepared to wait and see if the international price rises before they dive in.
The local import parity cost of urea unfortunately rose by almost 4% as a result of the recent Rand implosion versus the US Dollar (see more on this in the General section below). The Middle East Urea price that this local value is based on declined by $3/t, and remains in the $330/t FOB range.
Ammonium sulphate numbers rose moderately this week, driven by increased demand in China (likely to be short-lived as the domestic application season is almost over) and some breakdowns in production that have tightened up supply. Most regional markets were reported to be slow this week as far as amsul trading activity goes. Amsul stocks in Brazil remain high, with not much buyer interest in new imports expected any time soon.
CAN prices in Europe were unchanged this week but some of the major European producers are trying to push prices increases onto their European customers now that retail sales are in full swing. Opinions are divided on the wisdom of this move as European demand has been sensitive to price and ammonium nitrate usage remains vulnerable to substitution by urea. Russian Ammonium nitrate producers are battling to find customers and fertilizer-grade AN (33% Nitrogen) is available as low as $150/t FOB Russia.
Ammonia markets enjoyed some calm this week, as a few scheduled and unscheduled stoppages at some large export plants helped to limit supply and balance the market. The outlook for ammonia remains rather pessimistic with most flags indicating downwards pressure on prices.
Phosphates
Most Phosphate regional prices fell this week, although the rollercoaster ride for US prices sees a $50 rebound
The prevailing mood in world phosphate markets is pessimistic with prices expected to keep heading down. DAP prices in the USA remain very unsettled as a few panicked buyers were prepared to pay as much as $150 per short ton above last week’s price. Most American DAP trades remained in the mid-500/t range, with the handful of deals done at much higher numbers dragging the average price for the week up.
High stock levels, declining production costs and the anticipation of greater exports from phosphate powerhouses such as Morocco and China continue to drive the negative expectation on prices.
MAP prices kept heading down as the Brazilian MAP price fell almost $20/t and impacting the Saudi MAP benchmark by an equivalent amount. The Saudi MAP price (in dollars) reduced by around 3.5% week-on-week, however the latest drama with the rand more than erased this reduction and the import parity costing increased by around 1.5%.
The Indians remain quiet on phosphate purchasing again this week. Regular contract cargoes priced under formula continue to head to India but adequate domestic stocks and the new (lower) subsidy regime mean that Indian interest in buying spot cargoes is minimal.
Potash
The South African Potash price sees a substantial downwards correction, just as the collapsing Rand creates unwelcome pressure on local fertilizer prices
The South African potash price, which had been static at just over $500/t CFR Durban for the previous 4 weeks, was trimmed downwards by $55/t to around $450-460/t.
Brazil also saw a meaningful price reduction of $15/t as prices there head comfortably into the $300s/t. In fact the softening Brazilian price has led to a reported 100,000t of Russian product initially destined for Brazil to be rerouted to the USA. Clearly the Western sanctions only go so far to restricting Russian potash flows. Brazil is at no risk of running short of potash, with more than 1 million tons of potash due to be shipped there during May.
Europe saw its prices slashed by around €40/t as sellers sharpen their pencils and chase business more aggressively with spring demand probably as buoyant as it’s going to get.
Overall, the outlook for potash remains the same – prices are expected to keep trending down as demand remains weak in most regions. Recent downgrading of crop price outlooks, particularly for maize, means that demand for potash will continue to be suppressed for some months to come as it is the nutrient most vulnerable to being cutback when farm economics are under pressure.
General Market Outlook
Rand in disarray as it hits all-time Lows against the Dollar, causing major stress on input costs for growers.
The South African government scored its latest ‘own goal’ in not only apparently arms-dealing with the Russians but then handling the situation incredibly poorly when found out. Needless to say, the Rand has been slaughtered in currency markets, dropping 5% against the Dollar to hit R19.20 by close of business on Thursday. If this devaluation is sustained, then the outlook for the upcoming growing season becomes gloomy as all the major input costs for agriculture are linked to the dollar exchange rate.
Brent crude oil had a calmer week with some recovery in price to $77.5/bbl as market optimism increased after digesting the US Fed interest rate hikes last month. With economic projections for US GDP and inflation being reduced, the main industry bodies for energy such as the US Energy Information Administration has slashed its outlook for oil prices for the rest of 2023 and 2024. The EIA outlook cut its 2023 forecast from $85/bbl for oil down to below $79/bbl, and its 2024 forecast is for oil to average $74/bbl.
The CME futures prices for maize, soya and wheat continued their downturn this week, dropping by 2%, 0.5% and 3% respectively. Poorer than expected demand for grains amidst the recessionary mood drove prices down. The weakening Rand and some pull-back from heavy selling in the past week supported a recovery of local futures values for cereals and oilseeds, with soya leading the way with an 8.5% rebound week-on-week. Presumably the much weaker Rand will also have a positive effect on local grain prices.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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