Nitrogen
Urea market shows signs of running out of steam
The Indian urea tender being postponed has resulted in the urea market becoming very quiet. With Brazil and China having national holidays, the lack of trading activity was magnified. With urea sellers becoming more interested in selling before prices fall too substantially, there were reports of big price reductions to Brazil. The Brazilian price moved down $10/t to $385/t CFR but there was talk of deals being done another $10/t lower.
Urea prices out of the Black Sea (Russian and Ukrainian urea in other words) fell too, as their domestic markets are saturated with product and they need to start finding buyers around the Mediterranean, such as Europe and Turkey. This of course has a knock-on effect on other suppliers trying to sell urea into that region, pushing prices lower.
Egypt continues to lead the market from a price perspective, offering urea at $410/t FOB but this price level is getting no interest and even indicative offers of $400/t to European buyers are being rejected, showing clear resistance to prices at this level.
These negative factors impacted the Middle East and trimmed around $10/t off the price – leaving the Middle East FOB value at around $375/t. In terms of our import parity costing of urea, we saw freight move up a couple of Dollars and the Rand recover very slightly against the Dollar leaving the import parity cost lower by 1.6% week-on-week.
The USA urea market continued to head upwards but trading volumes were limited. Cold weather put pressure on gas availability and there was talk of some domestic urea plants being idled due to gas shortages. This is likely to be a very short-lived issue but it was enough to encourage American traders to bid prices up a few Dollars.
The market view is that urea prices look set for a fall in the coming weeks but demand from the big Northern Hemisphere (spring) markets is believed to be strong enough to prevent a large price drop. Urea is expected to move back towards the $350/t FOB Middle East level. While we believe this is a reasonable view, we do point out that urea price movements are very seldom moderate or in line with market expectations – the price tends to either be sticky/static or move dramatically. So we would not rule out a drop of closer to $50/t (down to $330/t FOB Middle East), although this is much less likely than the market consensus figure of $350/t.
Ammonium sulphate market activity was extremely quiet as the two big players, China and Brazil, were absent with their respective holidays and prices were unchanged. Indications are that Chinese domestic demand for amsul is slowing markedly and export volumes are likely to rise – already traders are offering bigger volumes. This will put downward pressure on pricing in the coming few months.
Ammonium nitrate prices were mostly stable this week. The biggest talking point in AN markets is the news that Russia is considering banning AN exports from St Petersburg port, which is the main export port for Russian product. This is going to be difficult for Russian AN producers as their domestic demand will end soon and they will be scrambling to find routes to market. In terms of end-users, this move would unlikely impact them too significantly – limited volumes of Russian AN are going to Europe and Brazil has been a big buyer in the last 2 years but Brazilian demand has slowed and their summer rainfall season is more than 6 months away in any case.
Ammonia prices kept drifting downwards this week as lack of demand is putting producers under real pressure to move stock. The major benchmark points of Europe, the Middle East and Far East saw prices fall $10-15/t, with prices in Asia now not much above $300/t. Prices in the West remain a lot higher in the mid-$400s which will no doubt see Middle East cargoes start moving west.
Phosphates
Phosphate markets very quiet this week amidst weak demand and Brazil closing down for holidays
Phosphate prices were broadly flat across most major markets, reflecting the current equilibrium between supply and demand. The only meaningful exception to this was the US where DAP slid down by $10/t as buyers argued that forward prices for both maize and soya keep declining.
There was a moderate volume of DAP sales to Europe, Mexico, India and Pakistan but all of these trades were made at unchanged prices from last week.
With Brazil mostly shutdown for the Carnival holiday, MAP prices were unchanged. With falling crop prices still featuring, expectations are that MAP prices, especially in Brazil, are going to be under downward pressure when trading activity resumes.
Looking at February sales indications for the two major exporters, Morocco and Saudi (while China remains absent due to its self-imposed export ban), Morocco has so far sold around 360,000t out of a nameplate capacity of more than 1 million tons per month. Ma’aden in Saudi has reportedly sold around 200,000t of its possible 500,000t monthly production. A clear indication of the lack of buyer demand.
The only thing really sustaining phosphate prices at current levels is the ongoing limited supply of product – demand remains well below normal levels for this time of year. The return of Chinese phosphate exports some time in Q2 is going to put prices under huge stress.
Potash
Potash markets were quiet again this week with supply heavily outweighing demand
Potash prices were unchanged this week with market activities quiet due to the major holidays in China and Brazil.
Prices in the US were stable as reasonable spring demand is being tempered by declining crop economics and American traders are being cautious not to curb sales by trying to push prices up.
With the Brazilian price sitting at around $280/t CFR, producers are hoping that the floor has been reached and prices may strengthen when buyers return after the holidays. While demand may increase in anticipation of the next planting season, poor crop economics remain an overwhelming negative factor and potash is always the most vulnerable nutrient to being cut from the application programme when farmers are under cost pressure. We thus have difficulty seeing a scenario where potash prices rise much in the coming months.
In Europe, spring buying of potash is yet to get into full swing -potash prices are still a good $50-70/t higher than other regions and reductions are expected once buyers come into the market.
General Market Outlook
Grain price outlook worsens, while Energy prices ease
Brent Crude oil saw prices hovering around $81-82/bbl this week. The oil market is considered to be fairly balanced at present, due to OPEC+ producers cutting back production and these cutbacks being counter-balanced by softening demand as most major economies slow down. Market commentators are saying that oil may be in oversupply for the year ahead, which suggests that prices should have limited upside. The European TTF Gas price fell below $8/MMBtu as gas demand eases with less cold weather in Europe. US natural gas prices also moved strongly downwards $1.6/MMBtu which is a 5 year low for the US market.
CBOT (Chicago Board of Trade) price for both maize and soya hit 3 year lows this week on the back of positive US stocks and production in the past year boosting supply and ever-increasing competition from rising production in South America pushing prices down. Safex prices continue to bounce around, with Rand volatility adding to the mix – white maize this week rose by 5.5% to just over R4,300/t and yellow maize firmed slightly to just under R3,800/t. On the other hand, soya, sunflower and wheat all showed declines on Safex this week.
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