Nitrogen
Urea prices remain under downward pressure as buyers delay purchasing in hope of even lower values
The build-up of inventory and resultant pressure to chase sales is the dominant theme amongst the major urea producers around the world. The seasonal lull in demand means that there are very few buyers experiencing any urgency to make purchases and this is leaving sellers feeling the heat. The handful of producers that tested the markets this week quickly found that the prices needed to conclude deals were even lower than they feared.
In the Middle East prices were $10/t down on last week and are now sitting at $275/t FOB. There is some buying interest from Thailand and Australia, which import around 1 million tons each annually – whatever volumes these countries buy will not be enough to make a dent in the current oversupply. In other words, some really big volumes need to be sold to tighten the market and lift prices – and there is no sign of any such demand. It is early for the Australians to be buying for their summer rainfall season and it is likely that current purchases are an attempt to average down their urea import costs.
Egypt has been actively trading to try and move some of its stocks and despite usually achieving a premium over most other markets, Egyptian sellers have struggled to get much above $280/t.
After showing some price gains in recent weeks, Brazil saw a big drop as buyers realized that there are bargains to be had. The Brazilian price has dropped from $315 to $290/t CFR as Brazilian importers have been able to secure big discounts, especially from sanctioned origins such as Venezuela and Iran.
The North American market is adequately supplied at present, after substantial purchases in Q1 – heavy rains are apparently delaying spring planting in the Cornbelt but overall the outlook for the US planting season is looking fine but there is no likelihood of increased demand for urea that would require the Americans to enter the spot market.
As is often the case in a market downturn, the sanctioned urea exporters are under the most pressure to discount to generate sales. Prilled urea from Russia is apparently on offer for as low as $230/t FOB. Part of this is caused by shipping rates from the Baltic ports to just about any market that would buy prills (and would buy from Russia) – ship availability is rather limited, meaning higher freight rates, and this in turn pushes down the netback price to the Russians.
With India taking delivery of urea from its most recent tender, it is now sitting on a domestic inventory of around 10 million tons of urea – suggesting that they will not be ‘saving’ the market by issuing a new urea tender any time soon. Having said that, the Indians are always extremely aware of market opportunities and a tender now would likely achieve a very low number as there would be intense competition amongst bidders to secure volumes to India in the absence of any other big demand.
The Rand made an unexpected recovery against the Dollar and Euro this week – strengthening by around 2.5%. This positively impacted (lowered) all our import parity prices, with the current replacement cost of urea now sitting at around R6,250/t before margin. In our opinion, it is a good time for South African farmers to buy now!
Ammonium sulphate prices were supported by a surge in buying from Brazil this week, which lifted both granular and crystalline prices by around $5/t. Amsul prices remain at very low levels by historical standards, although with urea being so low, amsul is trading at a premium on a nitrogen basis. It appears that buyers in a number of markets are moving to cover their amsul needs, suggesting that they see the market (for amsul anyway) near the bottom.
Ammonium nitrate markets have been subdued as Russian AN exports are being constrained by the export ban from St Petersburg port. The handful of AN buyers, principally Brazil, are sourcing AN from other markets but with urea being cheap and abundant, few AN buyers are too concerned and are switching to urea in many cases. The European supply season for CAN is mostly complete, thus CAN prices remain flat too.
The ammonia market has been quiet while urea has been in freefall. The most notable development this week was the fortnightly contract price for Tampa in the USA being settled $25/t down at $450/t CFR. Ammonia into Tampa is exclusively for ammonium phosphate production and with DAP prices falling significantly, it is natural that ammonia prices are coming under pressure. The Western ammonia markets of North America and West Europe remain at a large premium above Eastern markets. The Middle East price remains at below $300/t FOB.
Phosphates
DAP prices, especially into India, are falling
Last week saw the Indian DAP price lose a good $20/t as traders long on product direct their sales to the only active buyers. The Indian DAP price is now below $520/t CFR, which implies netback values to China and Saudi Arabia of below $500/t – the benchmark prices in those markets are still above $500/t FOB but it appears to be a question of time before they drop below $500/t. Indian DAP prices have now fallen around $75/t over the past 6 weeks.
The Brazilian MAP price has edged down slightly as Chinese exporters have begun to chase sales into Brazil – the price is sitting around $570/t CFR but reports of Chinese offers at $20/t lower are circulating, suggesting lower prices for Brazil may be imminent. The Saudi benchmark MAP price remains unchanged at just below $530/t FOB.
The US announced an increased countervailing duty (CVD) on Moroccan phosphate imports into the USA. The duty was raised from around 2% to 14.2%, which will rule out most phosphate trade from Morocco to the US for the foreseeable future. At the same time, the Americans have reduced duties on Russian phosphates producers PhosAgro, from 28.5% to 18.8%. The duties against Moroccan major OCP were the result of a petition made by US producer Mosaic alleging unfair subsidies made by OCP enabled it to ramp up phosphate sales into the US to the detriment of Mosaic. The gist of Mosaic’s argument is that OCP subsidises its phosphate rock cost, which enables it to sell finished phosphates (MAP and DAP) into the US at lower values than it should. Because this legal issue has been in play since 2020, Morocco has not been targeting phosphate sales to the US for the past year or so – hence this ruling not making a huge impact on current trade to the US. It does mean that OCP has to focus its sales efforts on other markets, despite being geographically well-positioned to serve the US.
Potash
Potash markets remain very quiet, as is normal for this time of year
Potash prices in all the major regions held steady this week. Demand is usually at its lowest in May and potash market players are patiently waiting for a signal from one of the major price ‘events’ of the year – at the moment the main outstanding pricing event is the Indian annual contract price, which has still not been finalized more than 4 months into 2024.
Prices have edged down slightly in Europe, which has been expected for a while as the European potash price is the highest of any region.
Traders are trying to talk up the price into Brazil, suggesting a $5/t increase is possible but so far not a single deal has been done at a higher price. Brazil already has over 1 million tons of potash imports lined up for May, so there is no shortage of product and therefore no real pressure on buyers to consider an increase.
Perhaps of some interest to the South African market, mining major BHP has announced an offer to acquire Anglo American – the focus of both of these companies is the mining of commodities other than fertilizers but both have some involvement in potash projects. BHP has the Jansen project in Canada and Anglo is expanding its polyhalite operation in the UK. Should the acquisition proceed, it will have no meaningful impact on potash prices or availability.
There has been some chatter amongst the local potash importers of the Durban price rising by $10-15/t for the next shipment but there is little market support for such an increase and the local import price remains unchanged again this week.
General Market Outlook
Talks of a ceasefire in the Middle East bring relief for energy prices
Brent crude oil prices took a massive drop over the past few days as oil traders see lower risk following discussions of a possible ceasefire between Israel and its Middle Eastern opponents. The oil price fell from almost $9/bbl on Tuesday to $83/bbl currently. Adding to the pressure eon oil prices is the concern of economic slowdowns in the USA and China, which are the biggest consumers of oil.
Natural gas prices have also calmed down, with the EU TTF gas price stabilizing at $9/MMBtu as gas demand in Europe slows down as winter heating demands recede. US natural gas prices showed a few moderate spikes, rising from $1.7 to $2/MMBtu – most of this volatility is driven by month-end trading activities where traders balance out their books and some distress buying causes short-lived spikes.
This week saw local and international crop values moving in opposite directions once again. Unfortunately this time it was local prices that have taken a big dip, with white and yellow maize prices on Safex dropping by 8% and 5.5% respectively. Part of this drop may be attributed to the Rand strengthening but not the whole extent of the drop -some profit-taking has contributed to lower prices. At least international prices for maize and soya saw gains of over 2% on the week as flooding in Brazil and rain-related delays to spring planting in the USA raised risk concerns.
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