Nitrogen
Urea markets looking for a price direction as prices rise in importing regions and fall in exporting regions
The market saw a lot of mixed signals on Urea prices this week. The broad view is that the market remains weak, however prices did rally in North and South America. Egypt also started the week with a bang as a number of small parcels were sold to Europe and Turkey but this buying soon fell away and the Egyptian price dropped below last week’s level.
The strongest ‘negative’ signal in the urea market was the indication of India’s monthly closing stock value for end-November. This figure was confirmed at 7.5 million tons which is high, suggesting that the Indians will not be buying aggressively in the short term and the next tender may also be pushed back and/or target lower volumes than the market anticipated. The annua Indian FAI conference concludes today so further news may emerge in the coming days about India’s likely purchasing plans.
Probably the primary reason for importing markets showing higher prices this week was an unexpected jump in freight rates. While the increase is modest at $3-5/t depending on route, the message is clear that traders are already operating at breakeven or negative margins and they are thus insistent on passing on any increases in costs to the end-users.
The Brazilian price rose again this week, driven by higher freight rates to Brazil and apparently increased buying interest. The increase was $5/t which is bringing Brazil more into line with the Middle East price, once freight is considered.
The Middle East price dropped sharply by $10/t overall, with the high end of the price range falling by $25/t. The Middle East fob price is now in the $310-315/t fob range, which is the same as the Iranian price – Iran has been competing hard with ME producers for South African market share in recent months purely on price. A rise in freight costs offset some of the price reduction, thus our import parity costing of urea declined by 2.4%. The local mood around top-dressing prospects has improved with maize prices rising and some reasonable rain being predicted for the remainder of the year.
Trade data for October emphasized the huge late season imports of urea into SA over the past 3 months. The year to date total is now touching on 775,000t, which is 12% higher than the 688,000t imported in Jan-Oct last year. Around 200,000t of Iranian urea and 35,000t of Russian product was imported over the last 3 months (around 45% of what was imported during the 3 month period).
Ammonium sulphate prices had another week of falls, especially for Chinese product. On the other hand prices in Brazil seemed to be supported by the move in Brazilian urea prices and saw a rise. In Europe the amsul price remained stable as imported product is forcing local producers to keep their prices low or risk being out-competed.
Ongoing wet weather in Europe continues to hurt Ammonium nitrate sales and thus prices. The CAN price in Europe fell around €30/t as the bigger EU countries report minimal demand for nitrogen for prompt application. The East European/FSU producers are directing their AN to their domestic markets, so prices there have been stable although at quite low levels compared to EU and other prices. In summary AN prices remain under severe pressure as the overall nitrogen supply-demand balance remains heavily tilted towards oversupply.
The Ammonia market remained stable this week but the market sentiment is bearish with prices expected to follow the rest of the nitrogen segment. Buyers are holding out for lower prices before committing to meaningful volumes and sellers appear happy to wait and not chase sales.
Phosphates
Phosphate prices were mostly stable this week, although pressure is mounting on India as local stocks decline
The tug of war between India and the major phosphate players has led most buyers to hold off on buying and hope that prices come down. This pause in buying has caused domestic stock levels in a number of Northern Hemisphere markets to fall to uncomfortable levels and pressure is now building on the US, India and Pakistan to ramp up buying.
The DAP price rose by $15-20/t in the US but all other benchmark prices remained flat for the time being. At the FAI conference in India this week, it emerged that the Indian authorities are now considering increasing the phosphate subsidy to smooth the way for phosphate imports to resume. India has an election next year and the farming sector is a very powerful voting segment, therefore the government would evidently rather throw money at keeping farmers happy (and supplied with adequate fertilizer) than play hard-ball with international producers and traders.
Morocco appears to be making the most of buyers returning to the market with strong sales into Pakistan. The removal of most of the duties into the US on Moroccan phosphates is expected to see an upswing in Moroccan sales, although that has not begun yet.
The Brazilian MAP price was unchanged for the 3rd week running and Brazilian buyers appear comfortable with their stock positions considering indifferent domestic demand versus slowing down import volumes.
Locally phosphates availability remains tight, although demand has also slowed down dramatically with much of the pre-plant and planter mix demand now over for the East and Central regions. The West is yet to plant and if the predicted rain over the next month does fall, then there could be a resurgence in MAP demand. With a Russian cargo en route plus Foskor importing a vessel, MAP supply should be reasonable for the remainder of the season.
Potash
Potash prices in Brazil take a $5/t drop as prices globally come under pressure again
Brazilian prices dropped to $325/t CFR, causing negative sentiment to break out on potash across other markets. As yet, the other major benchmark prices are unchanged but any new transactions may well see lower prices.
Demand for potash remains incredibly low and trading volumes are way below the norm for this time of year. There is a strong view that in many markets it is only the lack of trading that is supporting prices at current levels and if there were bigger buying volumes, the price would be lower as producers chase volumes.
As mentioned previously, the European outlook is poor and the US winter fill programme seems to be drifting out and looks like it will not happen before New Year at the earliest. There are very few potential supporting factors for potash right now. At best, the market is expected to possibly firm in Q1 next year.
General Market Outlook
Crude oil hits a 6-month Low as reduced demand and a weak economic output suppress prices
Brent Crude oil dropped to $74/bbl which is the lowest price seen since early June. Surprisingly, since the OPEC+ cartel announced production cuts a couple of weeks ago, oil prices have fallen more than 10%. There are increasingly negative signs for the global economy with China’s sovereign credit rating being cut, along with many state-owned companies and banks. There are a number of leading indicators pointing to the US economy heading into recession early in the New Year as well. Oil analysts suggest that oil prices will find resistance at $71/bbl and a floor at $68/bbl, indicating that perhaps oil prices are not far from the bottom. In other energy commodities, the European TTF Gas prices maintain its downward momentum and fell below $12.5/MMBtu. Moderate autumn weather in the US reduced demand for natural gas below expected levels and prices fell more than 10% again this week to $2.5MMBtu.
International maize prices were relatively stable this week but the weak Rand continues to support local maize prices, given a fair bit of optimism to farmers currently planting. Yellow maize firmed further to R4100/t although white maize gave up a few percentage points this week.
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