Nitrogen
Urea edges up further this week as sentiment fuels the market
Fertilizer markets in general, and urea markets in particular, love a bit of drama and few opportunities are missed to over-react to possible market drivers. This week saw Egyptian gas supplies curtailed, which prompted panic buying of Egyptian urea and added a good $20-30/t to the price. Egyptian gas supplies have been limited for years now as their gas fields are being exhausted, and as summer starts and electricity demand spikes, gas consumption often exceeds supply. The Egyptian government cuts back on fertilizer production and we see short-term production outages. By Thursday (yesterday), Egyptian gas supplies were back online and ammonia-urea plants were busy restarting with minimal production actually being lost– but the damage was done in terms of hysteria and urea prices around the world were dragged up.
The Egyptian urea price is now touching on $350/t FOB, up over $60/t from April.
The Middle East was able to gain $8-10 on the back of supposed Egyptian shortages. The Middle East price is now around $320/t FOB, with sales to Australia being the main activity this week.
Middle East prices added another $20/t this week, sitting at $310-315/t FOB. Only a handful of spot deals were done but producers are apparently comfortable with their stock positions after substantial sales during the past few weeks.
The rising prices in the Middle East and North Africa have pushed Brazilian prices up. Brazil was up by $10-15/t and prices there are now in the mid-$340s. Trading volumes are slowing down quickly as Brazilian customers push-back against these prices. Demand in Brazil remains weaker than usual and importers are anxious to avoid sitting with over-priced stock.
Our caution this week is that the urea price trajectory is far steeper than fundamentals support, which increases the probability of a correction (downturn) in prices over the next couple of months. Serious demand for urea is not going to emerge until the end of Q3. The more heated the urea market gets, the greater the incentive for buyers to withdraw and let prices cool down.
Ammonium sulphate continues to see fairly strong demand, which is supporting the slow but steady rise in prices. The hype around urea prices is also assisting amsul producers in getting higher prices. This week brought another $5/t increase for the various amsul grades. Prices out of China are now sitting at around $160/t FOB for granular/compacted and $140/t FOB for crystalline. Freight to Durban is estimated at around $45/t.
Ammonium nitrate sellers are closely attuned to urea price developments and have been quick to move nitrate prices up when urea prices increase. European demand remains on the weak side but European traders increased AN and CAN prices again this week. CAN prices in Europe are €260-270/t which makes CAN more than 50% more expensive per unit of nitrogen than urea.
Ammonia price were flat this week, indicating equilibrium between supply and demand. There are a lot of plants, especially in the Middle East and South East Asia down for maintenance, and with the Egyptian plants stopping briefly this week, the lack of price movement on ammonia points to weak demand.
Phosphates
Phosphates prices firm despite pushback from Indian buyers
Phosphate prices are hardly on fire but the market ticked up a few dollars higher again this week. Chinese exporters are showing a lot of discipline in offering prices and have been able to gradual raise their prices. The message seems to have sunk in that India demand for DAP is quite substantial and none of the phosphate producers seem ready to discount prices to chase business.
The Chinese DAP price gained around $10/t to trade at close to $520/t FOB China. The Indian CFR price for DAP is sitting at $520/t. which suggests that the Indians are going to have to pay a fair bit more if they are to secure the phosphates that they urgently need. Overall, most DAP benchmark prices were up around $5/t this week.
MAP prices in Brazil continue to march up – officially the price remains in the $580s/t CFR but there are indications that deals at up to $600/t CFR have been done. With Brazilian buying year-to-date being behind last year, Brazilian buyers are reluctantly accepting these higher numbers and beginning to increase purchases. It looks very likely that phosphate prices will continue rising over the coming few months.
Foskor published its MAP price for the first half of June at just below R11,000/t for bulk product ex-Richards Bay. This is a few hundred Rands below this week’s import parity and is a good deal if product can be secured now.
Potash
Potash markets remain muted with the overall mood suggesting lower prices
Similar to South Africa, India held its general elections at the end of May - the significance of this is that it has further delayed the already late annual Indian contract price for Potash. Buying has substantially slowed as various regional markets are looking at the Indian price to establish a reference number – in the absence of this Indian contract being settled, most buyers are pausing procurement, which is adding to the oversupply situation.
Potash prices in Europe were lower as sales picked up – drier weather across most of NW Europe has seen nutrient application increase and potash sellers are keen to realise whatever sales they can while there is some demand.
Potash prices in Brazil remain flat although traded volumes appear to be increasing with 1.25 million tons of potash imports booked for the month of June. There are unconfirmed reports of a $5/t increase but for now the price remains around $310/t CFR - $20 or so lower than our South African price.
General Market Outlook
Crude Oil prices down as OPEC cuts lifted and general demand is lower
OPEC+ last weekend voted to lift some of the production cuts that have been in place for a while – this immediately sent oil prices plummeting to $77.5/bbl mid-week. Subsequently Saudi Arabia and Russia have indicated that they may be willing to throttle back output in an attempt to support oil prices. Brent crude oil is presently trading just below $80/bbl, a couple of dollars lower than a week ago. The ECB has cut European interest rates for the first time in 5 years in a move which should hopefully boost economic growth in Europe. Higher than expected inflation data in other Developed Economies are delaying similar interest rate cuts.
Gas shortages in Europe are keeping prices high at $10.6/MMBtu. US natural gas prices rose moderately this week to $2.8/MMBtu.
The Rand depreciated further this week as the election results spook international investors and raise risk concerns for the South African economy.
International grain prices were generally flat, with the exception of wheat, which dropped over 6% in dollar terms, thanks to the harvesting of the US winter wheat crop showing better yields than previously thought. On the local front, white maize continues to perform well with prices touching on R5,300/t Randfontein.
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