Nitrogen
Urea trading was quiet this week with the Middle East benchmark unchanged, although some other regions saw price reductions. Other nitrogen products followed the same trend with limited buying and prices going sideways.
Urea pricing is expected to pick up in October but some price falls this week in regions such as North and South America encouraged most buyers to press pause and see if the price might decline in the next week or two and present some ‘bargains’. Europe is anticipated to buy strongly from October onwards and a number of traders are taking long positions with the intention of supplying Europe at higher prices.
The Middle Eastern producers are busy with their shipment programme to deliver their volumes to India as awarded in the recent tender. They are comfortable with their inventory levels as a results and are pushing for higher prices in October as they await the next Indian tender at the end of October.
Urea levels in Brazil are high due to active buying (imports) in the past 2 months, while domestic sales have been somewhat slow. The Brazil price dropped by $30/t this week as importers try to spark some trading activity,
Ammonium sulphate has a very quiet week too, as some small reductions were seen as many of the regular markets were inactive this week. Some upside to amsul prices is expected with Europe ramping up its purchases of the product as cheap source of nitrogen to help cover their domestic production shortfall. Amsul remains the cheapest form of nitrogen currently.
In general ammonium nitrate markets were quiet this week too, although CAN prices gained a few dollars in Europe. AN/CAN prices remain at such high levels that urea and amsul are being preferred where growers are able to make the switch.
Phosphates
Phosphates prices fell across all regional benchmarks this week as buyer interest remains low..
None of the major markets showed much interest on purchasing phosphates this week, and the Indians have finally opted to slow their buying down too. How long the Indians remain quiet is unknown but their buying activity is likely to strongly influence prices in the coming months.
Discussions over the Q4 quarterly contract price for phos acid to India are underway and early indications are that a substantial downward revision is likely. Indications are that a price of $1,345/t is being explored, which would be almost $400/t down on the current contract price of $1,715/t. The phos acid price is too high to make it economic to produce MAP or DAP from it, but if it falls in line with the phosphate value of MAP and DAP (a phos acid price of around $1,200/t), then Indian MAP/DAP production may increase, which would further reduce demand on the international market and send phosphate prices lower.
Our short term outlook for phosphates remains unchanged – the market is characterized by weak demand thanks to high prices and despite the issues around Russian and Chinese export availability, access to product is not a constraint. Phosphate prices are expected to remain under downward pressure in the coming months.
Potash
Another week of price cuts for Potash in most regions as the theme of weak demand continues. Both the South African and Brazilian prices saw a $15-20/t reduction..
As we had suggested in previous reports, the South African potash price was deviating from the general global price and a reduction seemed inevitable. According to the publications, the lower end of the price range has dropped $20/t – a discount aimed at bigger volume buyers to incentivize buying activity. In all probability the real discount figure is likely greater as the domestic buying season, particularly for potash, remains slow and the local price remains high by global standards. There are suggestions that growers/buyers are treading a fine line between holding off purchasing in hope of lower prices versus the risk of all product being sold out and the market being short. With the port congestion and resultant delays in Durban, the lead time for replacement cargo is nearer 8 weeks than 4, however we feel that the risk of stocking out would likely only come into play much later in the season as port stocks remain considerable.
A glance at the (green) trendline for potash prices in our chart at the top of this report shows how potash is now clearly trending downwards. Consider that the rand devaluation against the dollar over the past 3 months accentuated the peak seen in July and without the rand weakness the downturn would have been evident sooner. Potash prices have the most ‘momentum’ of all the nutrients and a sustained decline in price looks probable for the next 3 to 6 months at least.
General Market Outlook
Brent crude oil had a steady decline over the past week as the price fell into the $80s/bbl. The Rand threatened the R18:$ threshold this week but remains in the high R17s:$.
The US Fed hiked the US interest rate by 0.75% this week, taking interest rates to their highest level since 2008. This has further increased fears of a US and global recession and these fears have caused the oil price to drop into the mid-$80s. Weaker oil has helped the European TTF gas price head down to $55/MMBtu this week, a small step in the right direction for European energy users. The US natural gas prices have followed suit and shed more than 10% in the past week, now touching on $7/MMBtu, a 3 month low.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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