Nitrogen
Urea prices continue to trend downwards as buyers expect further decreases and are delaying purchases. Rising Russian export volumes and no Indian tender expected until mid-July means prices remain under pressure as supply is exceeding demand.
The annual IFA fertilizer industry conference has taken place this week and there is a consensus that urea prices are headed downwards for another month or so. More reports of Russian urea export cargoes going to Brazil, Mexico and Central America are emerging with prices being reported around the $500/t fob mark. Compare this with Middle East, North African and American prices in the high $600s and it is obvious why these prices are under pressure.
India is receiving its urea cargoes booked on the recent tender and is not expected to buy urea in any meaningful volumes for the month of June. The Southern Hemisphere markets of South America, Southern Africa and Australia should be starting to escalate their buying but buyers are confident of prices dropping further in the coming month and are comfortable to wait for now.
The US spring application season for nitrogen has also disappointed as widespread and heavy rains have delayed planting in much of the Cornbelt, which has swung some maize planting toward soya and also eliminated the top-dressing season. This has further hurt urea demand.
Ammonium sulphate prices took a downward step this week as the lack of demand forced sellers into cutting prices to move some volumes. The price is expected to slide further during the course of this month now that producers are under pressure to generate sales. Very little trading activity was seen in ammonium nitrate but the probability is that AN prices are set to fall as all other nitrogen products are declining.
The ammonia market saw limited activity and no price change this week, after the big drops seen in the past few weeks. Buyers are generally bearish about prices and prepared to wait for lower prices rather than commit at the current price level. The market sentiment is that ammonia is set to fall further. In other ammonia-related news, the ammonia pipeline that feeds ammonia from the Togliatti facility in Russia to the export tanks at Yuzhnyy in the Ukraine was damaged by fighting in that region this week. The pipeline is reportedly out of commission and will need to be repaired before ammonia exports can be resumed – of course the war needs to end first.
With regards to local costing of urea, the chart indicates that urea is reverting to its mean. In other words, the price spike appears to be over and the price is returning to towards its long term average. The price still has a long way to go! It was at R6,700/t exactly one year ago and it may be some years before we see urea getting down to that level again.
Phosphates
Phosphate prices fell in most markets, with a $400/t price spread being seen between the lowest and highest DAP prices around the world. Prices in the Western markets are particularly soft, while the price reductions in the East are smaller.
Poor weather conditions in the US hampered phosphate application there and high prices reportedly destroyed demand for phosphates by 10-15%. Domestic prices in the USA have been falling steadily as retailers try to sell their stocks before the season ends completely.
Russian phosphate exports have been surprising the market on the upside, with some major Russian phosphates players now reporting that their exports are back to normal volumes. While Russian volumes have been high, the price of Russian product has been heavily discounted below product from other origins. Brazil has been a beneficiary of cheap Russian product and the Brazilian phosphate price has fallen around $300/t over the past month as a result.
Phosphate prices in Asia remain high and there is a big price differential between the East and West. India continues to push for lower prices but only the Russians appear to be sellers at their desired number. This leaves India walking the tightrope between securing adequate phosphate supplies and burning up their subsidy budget due to high prices.
The outlook for phosphates prices looks bearish for the next month, with demand destruction in Western markets likely to lead to more price reductions. Demand is still relatively normal in the East but buyers are getting frustrated that prices in their region are so much higher than the West and will increase pressure on producers to reduce prices.
Phosphates prices do seem to have peaked and are moving downwards, particularly on a rand basis. However the exchange rate effect is significant and we will need to see further price declines in in the international market (dollar price) before we can conclude that phosphates prices are headed downwards.
Potash
No major price movements in the potash markets this week, although sentiment suggests that some price reductions may not be far off as supplies from Russia and Belarus have been higher than anticipated.
The potash market shared similar themes with the other nutrients in that Russian exports are proving to be greater than expected in light of US and European sanctions. A bigger surprise was the suggestion that Belarus is managing to export around 100,000 tons/month despite access to its normal export port in Lithuania being blocked.
Brazil has been a key market of late and it is now reporting that potash stocks are high and the pressure to buy is dropping. Potash prices are expected to start declining if the flow of Russian potash continues. There is a feeling that the initial reaction to the Russian invasion of Ukraine was panic and many markets bid prices up excessively to secure product, and now we are starting to see these prices unwind as the markets approach a new equilibrium. The Russian war is not over and potash supply disruptions are very possible, so further price spikes cannot be ruled out but it does appear that potash has peaked and prices will gradually trend downwards for the next few months.
General Market Outlook
Crude oil had a very bullish week on the back of proposed sanctions on Russian oil. Most soft commodities saw weaker pricing this week.
Brent crude oil almost reached $123/bbl earlier this week as threats of an embargo on Russian oil spooked the markets. Saudi Arabia announcing that it would step in to cover any shortfall from Russia helped ease things later in the week but the oil still sat at $117/bbl. In the US natural gas prices eased a little to reach $8.3/MMBtu but this remains a high gas price and US consumers are starting to grumble. The European gas prices declined to $26/MMBtu. Some gas analysts are starting to talk of all the major gas benchmark prices converging over the next year, which will be very concerning for the Americans. The Asian and European markets will hope that this would pull their prices down, if it indeed becomes a reality.
Agricultural commodities had a ‘down’ week, with international and local maize prices falling quite significantly. The rand strength versus the dollar helped offset the local maize decline to just 3% versus the 4.5% decline seen on the CME for the week. The oilseeds saw a 2% decline locally while international prices were mostly unchanged. CME wheat saw steep declines of almost 8% this week on the back of speculation around Ukrainian wheat stocks possible being released into international markets.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
|
