Nitrogen and phosphates drift downwards as Rand strength helps push local prices down.

Cost per kilogram of nutrient (R/kg):

Nitrogen

Urea from Iran and Russia is putting downward pressure on prices, as buying interest remains quiet. The ammonia price took a big step down this week as the US Tampa contract price dropped almost 40%.

Markets that are happy to trade with Russia and Iran are enjoying competitive offers for urea, as Brazil and US urea prices continue to drift downwards. The Middle Eastern urea producers are busy fulfilling their tender commitments to India but are facing much lower netback values for any new business as most major price benchmarks are well below the $690/t fob value that the Indian tender price represents. US nitrogen demand continues to be hampered by wet weather conditions for planting and some of the northern states are starting to switch from maize to soya, which will further hurt nitrogen demand.

It looks like the usual Q2 seasonal lull for urea demand is set to continue for at least another month, unless some unexpected demand emerges.

The ammonium nitrate and ammonium sulphate markets were also quiet this week, with prices broadly going sideways and the market sentiment pointing towards prices continuing to trend downwards. The main annual industry conference, IFA, is taking place next week, so there is hope that some signs of market direction will emerge from discussions taking place there.

Ammonia saw some large downward price corrections this week as the US Tampa contract price dropped $425/t to $1,000/t CFR and the Middle East ammonia price benchmark dropped around $100/t too. This will be welcome relief for the local South African fertilizer producers that consume ammonia to produce MAP, CAN and NPKs. An ammonia import cargo was booked from Algeria sailing to South Africa, which may be a first from this origin.

 

Phosphates

The market sentiment for phosphates prices continues to be quite negative/downward but players are waiting to see whether India’s attempt to force prices down towards the $900/t mark is successful. Demand destruction remains a common theme as buyers reduce their purchasing volumes.

Most MAP/DAP prices around the world continue to float in the $1000-1100/t range. There is a lot of noise around prices in various regional markets – with the Chinese domestic price a good $300/t or more below international prices but the Chinese government is maintaining strict restrictions on any export sales. Brazil is being offered discounted Russian phosphates, while the Moroccans continue to demand a big premium for their phosphates.

The phosphoric acid quarterly contract price remains unresolved and it looks unlikely that a price consensus for this quarter will be reached, considering there is only one month left. The Moroccans are standing by their position of $2000/t while Indian officials are announcing that they will not pay anything above the Q1 price of $1530/t. Interestingly, some of the smaller phos acid exporters to India like Jordan have rolled over the Q1 price and have been selling to India at that level.

It appears that Foskor has agreed to another large phos acid export to Bangladesh during the past week or so, which has angered a number of the local liquid fertilizer producers who are concerned about getting adequate phos acid supplies ahead of the liquid season. Foskor is reported to be running fairly well otherwise, although MAP availability remains incredibly limited in the South African market.

 

Potash

A very quiet week for potash as prices rolled over and no price changes are expected any time soon. 

Potash market players are apparently waiting for next week’s IFA conference to thrash out potash prices. Emerging trade data from Brazil points to over 500,000t of Russian product destined for that market, which represents almost half of Brazil’s May requirement. This is a larger volume than most market analysts anticipated being possible out of Russia. Russia historically has supplied 10-15% of Brazil’s potash imports at this time of year.

This may all point to downwards price pressure, until more potash supply emerges, prices are not likely to change.

Asian markets have been struggling to source their full needs and trade data for the year to date is indicating that Asian buying is 15-20% lower than the same period in 2021. Not only is this a sizable reduction to potash consumption but is a major concern for crop yields and thus food security.

 

General Market Outlook 

Brent crude oil price remains very strong this week, as some recovery in the Rand gives relief on local commodity prices.

Crude oil had a very bullish week with the price rising steadily from $111/bbl to touch above $117/bbl by Thursday. In early trading this morning prices appeared to drop a little but oil prices remain very elevated. On the natural gas front, the US Henry Hub price leapt from $8/MMBtu to go above $9.5/MMBtu as June options expired on Thursday and some players had to scramble to get cover. European gas prices dropped to $26/MMBtu earlier in the week before moving up to $28/MMBtu currently.  

Maize prices declined on the international front over the past week, and the stronger rand exacerbated the drop in Safex prices for both white and yellow maize of over 4%. Local soya and sunflower prices bucked the maize trend, overcoming weaker CME prices and the stronger rand to gain around 2% over the week.

The rand strengthened against the dollar for the second week running, gaining just under 1%.

Latest Direct Hedge quotes for urea and MAP swaps in USD:

As we speculated might be possible last week, the urea Swaps price softened slightly to align with the physical urea market. A question that could be asked is why the forward urea price did not decline more considering the negative sentiment in the market around urea prices. We probably need to see increased trading volumes to make any predictions around the urea price direction – currently, trading volumes are so limited that it’s difficult to draw robust conclusions about where urea prices will be in the next month or two.

There was no change on the Brazil MAP forward prices this week, as the MAP market remains subdued and most market participants are waiting for the IFA conference next week to get some pricing signals.

If you would like to discuss these fertilizer price trends in more detail, or discuss other fertilizer products not addressed in this report, we would love to hear from you. We would also be happy to discuss your fertilizer procurement needs with you.

Andrew Prince 

This email address is being protected from spambots. You need JavaScript enabled to view it.

Another week of falling fertilizer prices, with only Potash showing some stability.

Cost per kilogram of nutrient (R/kg):

Nitrogen

The price downturn has set in solidly on the urea market as all major price benchmarks saw reductions this week. Urea sellers were increasingly aggressive in offering discounts to generate sales volumes. The urea market looks long for the next 4-6 weeks and further price decreases are expected.

Substantial volumes of urea being offered in Brazil and the USA saw prices sliding as producers and traders recognize that they are unlikely to find buyers in the next month if they delay. Producers are also cognizant of their rising inventory levels and the next meaningful tender volumes are only likely to emerge in the 2^nd half of July from India. There is also a growing prospect of Chinese urea exports resuming in earnest in July, which will further exacerbate the oversupply situation.

Ammonium nitrate and ammonium sulphate prices got caught in urea’s slipstream and saw large drops this week. This decline was overdue as urea has fallen more substantially than either of these products in the past month. With demand from the Northern Hemisphere now over, ammonium sulphate saw a drop of 8-10% across the various price benchmarks.

While the ammonia market didn’t show much actual reduction in price, the message from all markets was the same – there is no demand right now. Supply from most sources remains strong and the outlook is thus for further price declines.

The import parity costing of urea yielded another decent step down, falling around R500/t on the week, despite the rand weakening slightly. It looks like the price slide will continue for at least a few weeks more, which is good news for local urea buyers.

 

Phosphates

The biggest news this week for phosphates was the emergence of Chinese exports with 1.2 million tons being offered on the Bangladesh tender. Phosphate prices around the world kept up their recent trend of moderate weakness, with small price drops being seen.

Trade data for US phosphate imports are showing the extent of demand destruction in that market, with year to date figures showing a 66% drop in imports. The US is expected to import 1 million tons less of phosphates in the 1^st half of 2022 versus the same period in 2021. This does present an upside scenario later in the year if the Americans return to the market aggressively to make up this shortfall, which could easily send phosphate prices racing back up again. Of course, the key question until then will be what is the world supply situation for phosphate looking like.

The news about Chinese phosphate sales should be good for the market but it remains unclear what the volumes of exports will be. Any tons will help and will put some downward pressure on price but the world market remains extremely short of product and ideally the Chinese need to be exporting close to 1 million tons per month for the 2^nd half of the year.

Brazil saw further small price drops this week as they continue to benefit from Russian phosphates flowing their way. Phosphate stocks in ports and warehouses are said to be very high, so importers are feeling the pressure to start selling product.

Trade data for MAP imports into South Africa for the period January-April shows that around 43,000t were imported, down 26% on the 58,000t imported in the same period last year. We do understand that a number of cargoes are planned to sail to this region in the next 6 weeks or so.

 

Potash

Mixed price directions for potash across different regions this week. In the Asian markets there is some upward price support as demand remains fairly strong. In the Americas weak demand and increasingly available Russian supply is pushing prices down. 

The flow of Russian potash into Brazil has now begun to impact prices there and small price reductions are being seen. Unfortunately this hasn’t translated to equivalent price adjustments in Southern Africa as the potash supplied to the region has come from traditional origins such as Germany, Canada and Chile and thus not under the same pressure to discount as the Russians.

Another indicator of demand destruction seen is the 22% reduction in potash imports by the USA for the period January to April this year. US importing for their current season is largely complete, so this trade data is a good guide to the real impact that high potash prices have had on the buying of potash.

Potash imports have been flowing into Southern Africa and port stocks have built to comfortable levels. Local demand for potash remains extremely quiet, probably because farmers are more focused on harvesting right now, plus buyers are hopeful of lower prices if they wait. This situation could change very quickly though as port congestion remains a massive headache for importers and the situation is likely to get worse as fertilizer imports start to ramp up for the next 3-4 months. Already some vessels are facing 20-30 day waiting times for a berth, and this is may well become longer as shipping traffic increases.

 

General Market Outlook 

Another volatile but strong week for crude oil, as gas prices start to respond to rising summer demand. 

Brent crude oil rose into the mid-$120s/bbl during the week but closed at $122/bbl as negative economic news around a new Chinese covid lockdown cooled the market. There are also signs from the US that its demand for oil may slow as the impacts of expensive oil are now starting to be felt throughout its economy. European gas users were enjoying their best week in many months as prices slid to $25/MMBtu only to be shocked by a fire at a major US LNG export hub. Then sent European prices racing back up to $26.5/MMBtu – the US supplies more than half of Europe’s LNG. Earlier in the week, US gas prices were pushing $9.5/MMBtu on expectations of a very hot summer fueling gas demand but the outage of the Freeport LNG export facility meant that gas earmarked for export was redirected back into the US domestic market and pushed prices down to around $8.9/MMBtu by the end of the week. 

CME maize prices firmed nicely over the past week, with the July marker rising almost 6%. Unfortunately the same rise was not experienced in the local market with white and yellow maize both shedding about 1% on the July contracts. Likewise sunflower was down on the week and only soya enjoyed a positive week on the local markets.


Latest Direct Hedge quotes for urea and MAP swaps in USD:

The urea Swaps market continued its downward correction, shedding around $50 on most of the monthly quotes. The physical market has shown a sustained downturn over the past month and more declines are expected, hence the forward market is correcting rapidly in line with the physical. The question that is getting louder is “where will urea bottom out, before it starts its seasonal upturn in the later part of the year?”. Our expectation was that urea would probably bottom out somewhere in the $600s but with the forward market already touching $600, it seems that the market may fall lower – at least into the high $500s and possibly down to $550/t. When the Swaps quotes start to stabilize, we should get a good sense of where the market sees the bottom of the current urea downturn.

The MAP Swaps market saw no changes again this week.

If you would like to discuss these fertilizer price trends in more detail, or discuss other fertilizer products not addressed in this report, we would love to hear from you. We would also be happy to discuss your fertilizer procurement needs with you.

Andrew Prince 

This email address is being protected from spambots. You need JavaScript enabled to view it.

Gas supply issues in Europe cause havoc with Nitrogen prices. Phosphates prices slide down and Potash stays flat for now.

Cost per kilogram of nutrient (R/kg):

Nitrogen

Russia throttled back on gas supply to Europe, which sent EU gas prices soaring and upset nitrogen prices across the board as EU buyers scrambled for product. Urea prices looked set to drop a few days ago and instead now look likely to rise.

Egypt, which is the favoured urea supplier to Europe, saw its urea prices jump over $100/t in the past two days as fears of nitrogen shortages in Europe prompted a wave of spot urea purchases. The Middle Eastern producers, who saw prices in the $490s earlier in the week for sales under the Indian tender, were able to achieve sales in the low $600s last night (Thursday)! This gives an average price that is lower than last week but the reality is that spot urea purchases right now would land in Durban port at around $670/t CFR.

The mood in the urea market has completely swung around, with many players holding the view that urea prices will now remain firm and the question is how high will urea rebound. The urea Swaps/forward market added $100/t to its Arab Gulf urea price quotes in the last 24 hours alone. Our opinion is that the urea market, as it often does, is over-reacting and the degree of price negativity seen last week was excessive, just as the degree of bullishness around the price today is probably excessive too.

The dust has now settled on the recent Indian tender and around 600,000t of urea were confirmed, with shipment to be completed by the end of August. The Indians will need to return to the international market in the next 6-8 weeks. They limited their tender volume in this tender in anticipation of prices falling further – they are no doubt now regretting not buying a whole lot more.

Ammonium sulphate and nitrate saw their prices diverge this week. Ammonium nitrate prices leapt up on the back of spiraling EU gas prices, whereas amsul prices remain under pressure with the recent fall in urea prices. The sulphur market has also tanked spectacularly in the past month, losing over 80%, and this is also putting downward pressure on amsul values. If urea prices rebound significantly in the coming weeks, then amsul prices are likely to reverse the current direction and follow suit.

The ammonia market is expected to react to the EU gas price drama too – the US Tampa price rose $140/t this week, while the European ammonia price itself rose by $40/t. The handful of European producers that were still running have been forced to idle their plants as gas prices rose above $70/MMBtu, which equates to production cost for ammonia of well over $2,500/t just for the gas feedstock component. The Middle East ammonia price has not seen much movement as its natural market in Asia remains very subdued for ammonia. And the Middle East is the most distant supplier to the major western markets.

 

Phosphates

Phosphate markets around the world saw price reductions as plummeting prices for sulphur, weaker crop prices and ongoing demand destruction are now finally impacting MAP and DAP prices.

Brazil continues to sit on substantial MAP stocks after bumper imports of mainly Russian product for the first half of the year. With Northern Hemisphere seasons now finished and all eyes turning to the Southern Hemisphere, high phosphate prices are hurting demand from the predominantly Third World nations in the south. Affordability is a major concern and the recent fall in crop prices has added to the negative outlook on phosphate usage.

While phosphate prices look set to slowly but steadily decline in the coming few months, it must not be ignored that China is only exporting at 40-50% of its usual volumes. The Chinese government could reimpose the almost total ban on phosphate exports at the end of the year (although this scenario is considered extremely unlikely right now) which would tighten the supply-demand balance rapidly. On the other hand, the Chinese could return to normal phosphate export volumes, which would push the prices down substantially. Energy prices also play a role in phosphate production costs, so this input cost must also be kept in mind.

Rising ammonia prices will start to pressure some of the non-integrated phosphates producers but currently this is countered by the huge fall in sulphur prices. Considering how susceptible many of the factors are to change on a weekly basis, the phosphate price could change just as quickly.

The rand regaining about 3% against the dollar helped local import parity costs this week. The Middle Eastern MAP price shed around $30/t too, which translated to the MAP rand value reducing by 6% week on week.

 

Potash

Potash prices remain under pressure and price drops start to come through in Northern Hemisphere markets. Potash trading activity in the Southern Hemisphere remained quiet this week. 

Potash prices in the US saw big drops as many producers turned away from Brazil to reduce competition and further price erosion and focused on late season ‘refill’ sales in the US. With US potash demand still soft, prices went down. Brazil saw no change in prices and the high inventories are likely to lead to further price drops in the coming weeks. The Southern Hemisphere demand season will kick in soon, so prices are not going to remain under downward pressure for that much longer.

The situation in South Africa is similar – adequate stocks of potash in port and slow retail sales mean that there is limited import action. The stronger rand meant that the import parity value of potash reduced by around 3% this week.

 

General Market Outlook 

Energy prices headed up as Russian ‘interference’ pushed crude oil up to $108/bbl. Grain prices recovered some of their recent losses as hot, dry conditions in the US are increasing the risk of some yield declines.

Oil prices were anticipated to fall on the US Fed’s expected interest rate hike of 0.75% this week. As it turned out, most of this hike had already been priced into oil and the physical crude oil market remains in tight supply. This was enough to see oil rise steadily through the week from $102 to $108/bbl.  The EU gas story has been touched on throughout the report already – the main point was the Russians cutting back on supplies through the Nord Stream 1 pipeline despite it being back in service. The European energy market, which has been sitting on a knife edge anyway, quickly reacted and gas prices leapt from low $40s up to $71/MMBtu on Wednesday. The US Henry Hub gas price was influenced by the fuss in Europe and briefly spiked to over $9/MMBtu midweek, before heading back down to $8/MMBtu, which remains a high value compared to the $6/MMBtu average for the past year.

The current situation for fertilizer buying is understandably confusing for growers, who need to make their purchasing decisions soon – fertilizer prices are all over the place and the mood in the international market swings weekly. Fertilizer import activity into the region is well behind historical norms and port delays of about a month add to the supply risk. H1 data for fertilizer imports into Southern and East Africa suggests that imports were down by roughly 50% year on year at 1 million tons versus around 2 million tons for the January-June period in 2021. This gives an indication of the effect of high prices on not only fertilizer demand but also on affordability as credit lines were insufficient to maintain equivalent import volumes, even if the demand existed.

The rand is also very volatile, as are energy prices and shipping rates. Many of the major fertilizer retailers are pointing to very slow sales to farm currently as growers hold out for lower prices. All of which points to a possible mad scramble for fertilizer in the coming months when the first rains appear.

We are looking at putting together a price forecast for the remaining six months of this year and we would like your feedback on whether this would be of interest to you. The forecast would discuss some of the consensus industry forecast scenarios and consider sensitivities around energy prices and shipping aspects. Please drop us a line at This email address is being protected from spambots. You need JavaScript enabled to view it. to give your feedback and express your interest.

Latest Direct Hedge quotes for urea and MAP swaps in USD:

What a week for urea prices and the Swaps market did not escape the chaos. With news of the Russian interference in gas supplies to Europe, the forward urea prices escalated. As illustrated in the above table, the week on week increase of around $200/t is enormous. The probability is that much of this increase is driven by sentiment and is an over-correction. Whatever the views on the size of the increase, the undeniable conclusion is that urea prices look set to rise for the next few months.

The price pressure on MAP that has been evident for a month or two is now starting to come through into the market. The Brazilian MAP Swaps quotes saw another downward adjustment this week and point to a $50/t discount on current physical MAP prices in Brazil. The negative sentiment is likely to continue until Brazil has worked its way through its inventory of MAP, especially Russian product.

If you would like to discuss these fertilizer price trends in more detail, or discuss other fertilizer products not addressed in this report, we would love to hear from you. We would also be happy to discuss your fertilizer procurement needs with you.

Andrew Prince 

This email address is being protected from spambots. You need JavaScript enabled to view it.

Urea continues to rebound this week. Phosphates and Potash slide steadily downwards on weak demand.

Cost per kilogram of nutrient (R/kg):

Nitrogen

The big surge in urea prices that started late last week played through the market this week, with large gains seen in most urea benchmark locations. High gas prices in Europe are the motivation for bullish nitrogen prices but this is mostly sentiment as the global supply-demand balance remains unchanged.

The international urea market is full of hype about strengthening prices but this is driven by suppliers, who are keen to reverse the discounts that the market gave on the recent Indian tender. The latest European gas price events gave them ammunition to push this story. In reality, almost all European urea plants have been idled for many months now, so the lack of gas or high gas prices really do not translate into more expensive urea in Europe because no urea is being made there. Europe does have to import its shortfall of nitrogen that has resulted from domestic production being stopped but this import requirement has existed for close to 6 months now. In other words, the European nitrogen supply-demand balance has not shifted in recent weeks. In fact there is a good counter-argument that European demand could drop away any time as the fertilizer season is over (i.e. beyond some scattered top-dressing requirements, there is no urgent need for nitrogen) and the European stocking programme for next spring usually only starts in earnest in Q4.

In general urea demand is quiet around the world. North America is experiencing mixed sentiment with southern states facing a drought which has ruled out most late season top-dressing interest, while northern states start their refill programme ahead of winter. Many Asian markets are reporting low demand and the next Indian tender is expected at the beginning of September only. South America still has relatively high stocks so buyers are ignoring the recent price increases for the most part. Urea prices are likely to be volatile for the coming month at least and further ups and downs are probable.

Ammonium sulphate prices which have been falling in recent weeks, stabilized somewhat this week with the urea price hike helping support them. At best the amsul market is seen as stable at current levels, with ample supply and moderate demand. It would need urea to continue rising for amsul to see any big price increases. Ammonium nitrate remains firm as its biggest market, Europe, deals with the high gas price issue mentioned above. Any European production of AN/CAN would be based on imported ammonia, which would translate into a high cost of production – this is what is supporting the high AN prices currently.

Ammonia settled down this week as increased availability from a number of regions kept prices in check. The wide delta between urea prices and ammonia has encouraged some ammonia-urea producers to cut back on urea production and rather sell their ammonia because of the higher returns ammonia offers. Cutting back on urea production also demonstrates these producers’ lack of confidence in urea prices being sustained, irrespective of what they may be saying in public about high prices. The outlook for ammonia is for stable pricing for the next few months.

Half year trade data (January to June 2022) for urea shows that South Africa is around 75,000 tons (22%) behind on urea imports compared to the same period last year. This underlines the message that we have been giving for some weeks now: local importers have paused on purchases because fertilizer is not moving from port to farm. This leaves the country vulnerable to stocking out when the season does start because the lead-time on imports is a good 60 to 90 days as a result of delays in local ports. There is a high risk that once growers do start buying fertilizer the current inventory will deplete faster than it can be replaced and growers late on ordering may have a long wait to get product.
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Phosphates

Buying interest was absent for phosphates this week as buyers push for further price reductions, on the grounds that the collapse in sulphur prices has reduced the cost of phosphate production.

Phosphate prices continue to head down at major benchmark points such as Brazil and India. These reductions have in turn pushed the Middle Eastern price down by $30/t. Shipping from the Middle East to South Africa has eased off a few dollars too, which yielded a 3% lower import cost this week. The increase in the nitrogen (urea) value this week means that the remaining value of phosphate after deducting the value of nitrogen in MAP is close to 6% cheaper again this week. Phosphate has fallen from R66/kg to the current R58/kg in four weeks, a drop of almost 14%. The rand has played a role in that change but it gives an idea of the extent to which phosphates prices are trending down.

Most of the fundamentals for phosphates indicate that prices are likely to continue easing downwards slowly over the coming months. The lack of Chinese product in the market has now played out in terms of pricing and the Chinese production rates are now down to 40%. A meaningful change in Chinese production (either up or down) would be enough to shift phosphates prices away from their current level but there is no sign of any big change currently.

Phosphates look set to continue their slow but steady decline for the next month or two, which will give South African growers some relief. The ongoing decline in prices also has the unfortunate effect of delaying purchases, which raises the risk of fertilizer stocking out in the local market.
 

Potash

Potash prices continue to slide downwards as suppliers unsuccessfully try to stimulate demand. Falling crop prices and high stocks in Southern Hemisphere markets are maintaining downward pressure on potash. 

Most of the potash benchmarks around the world showed moderate declines in price. Potash suppliers are now avoiding Brazil because of the high stocks already in country and trying to direct cargoes elsewhere to avoid forcing the price down even further. Potash is now more than 20% down from the peak in April. Market commentators are now suggesting that the potash price will continue to reduce at a slow rate over the coming 6 months, as supply remains stronger than expected and high prices have done lasting damage to demand.

Half year trade data indicates that South African potash imports are almost 30% down year on year, at around 125,000 tons versus 170,000 tons for the same 6 months last year. This data is a bit misleading because the difference  can be ascribed to a single large vessel that arrived in June last year whereas an equivalent vessel was delayed in the Durban congestion this year and is only berthing now. The inventory status in South Africa is very high, so no short term concerns about availability of potash.
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General Market Outlook 

Crude oil prices reverse direction and head below $100/bbl as demand declines. Grain prices recovered some of their recent losses as hot, dry conditions in the US are increasing the risk of some yield declines.

Oil prices headed downwards strongly this week US monthly reports showed higher than expected oil inventories and the ongoing concerns of recession quietened demand. Brent crude that was $105/bbl a week ago was down to $95/bbl today.  EU gas prices sat above $60/MMBtu for most of the week before being pulled down by the oil price to drop to $59/MMBtu today. US gas prices continue to fluctuate sharply up and down between $7.5 and $8.5/MMBtu as influences like oil price negativity is balanced against peak seasonal demand due to hot weather.

Latest Direct Hedge quotes for urea and MAP swaps in USD:

As suggested last week, the urea Swaps market saw a correction this week as the market over-reacted to increases in the physical market. The short term outlook for urea remains bullish but this is based mostly on sentiment in our view. The Q4 outlook does appear to be more realistic and balanced.

If you would like to discuss these fertilizer price trends in more detail, or discuss other fertilizer products not addressed in this report, we would love to hear from you. We would also be happy to discuss your fertilizer procurement needs with you.