Nitrogen
Uncertainty hits Urea market as potential Russian fertilizer sanctions loom
The American urea market was the most active this week, with a wide disparity in prices being seen – a premium price of $370/st (short ton) was paid for prompt February tons, while March volumes are being traded at $330/st. This is best summarized as product available for immediate access is quite limited but prices are expected to fall significantly as the Northern Hemisphere moves into spring.
The news keeping the fertilizer journalists busy is that off potential US sanctions against Russian product. As the 2 year anniversary of the start of the Ukrainian invasion passes, Russian fertilizer has been exported to the US, and most other destinations with the exception of Europe, with little resistance. It now seems that the Americans are keen to use sanctions on Russian product to increase the economic pressure on the Russian government. The fact that fertilizer availability concerns have eased prices seem to be trending may have given the US government a bit more confidence in making the move now.
With the imminent threat of most major markets being denied to them, Russian urea prices collapsed this week, dropping by $30/t to around $350/t FOB.
Brazil remains weak with urea demand remaining weak and not much buying interest. Small volumes were traded and the price declined around $10/t as sellers tried to tempt some activity.
The Middle East market was also quiet although a few deals were done at the same prices as last week, which was considered to be a success as most markets are seeing prices drift down. The next Indian tender cannot come soon enough for most producers.
Our outlook for urea prices remains unchanged – lower prices in the coming months. On the local front, another appalling day for the Rand yesterday (Thursday) saw the import parity costing rise by almost 1.5% week-on-week, despite the underlying Dollar cost of urea being unchanged.
Ammonium sulphate markets remain subdued after the holidays for two of the big players, Brazil and China. Prices of granular product have fallen slightly, narrowing the premium of granular over crystalline product. The major trend influencing amsul prices will remain the direction of urea prices.
Ammonium nitrate prices are likely to be significantly impacted by the outcome of US sanctions against Russian fertilizer exports – not that the US is a big customer of Russian AN but AN supply is largely driven by Russian production and if markets for Russian product decrease, then prices will fall. In other news, European weather conditions deteriorated this week, slowing down early spring land preparation and depressing the already-weak fertilizer demand in the region.
Ammonia prices were unchanged this week with most of the chatter suggesting that prices may firm a little – mostly driven by the differential between ammonia and urea prices rather than any huge rise in demand for ammonia. The weakest market has been the East Asian market and some producers in South-East Asia, who are the primary sellers into the Eastern market, are talking of cutting back production to try and support higher prices.
Phosphates
The American Phosphate price rose on speculation of Russian sanction but other regions remain stable
US prices for DAP rose by $15/t as speculation of sanctions against Russian phosphates upset the American market. Bizarrely, very little Russian phosphate has gone to the US in recent years due to existing ‘countervailing duties’ (anti-dumping duties by another name), so the reaction is more sentimental than based on any likely shortages.
There was speculation around the possibility of China starting to open up some phosphate exports from 1 March, instead of the widely-expected April/May resumption. The restarting of Chinese phosphate exports is likely to be a slow process with government inspections being a requirement for export cargoes and this is usually a slow process, and a convenient mechanism for the government to speed up or slowdown exports. Even if a few Chinese phosphate cargoes are exported in March, the timing and volume is unlikely to affect prices too much.
MAP prices stayed flat this week. Brazil is still grappling with poor crop economics and inland prices of phosphates are said to be falling. At this stage, the import prices of MAP have not moved but there is very little buying interest.
Indian buying has slowed substantially as traders wrestle with the challenge of the reduced Indian subsidy rendering imported DAP uneconomical at present international price levels.
Potash
Another week of largely unchanged Potash prices, as North American producers report much lower profits
There was a small glimmer of activity with the upper range of Potash prices in Brazil apparently rising by around $5/t but in general prices across the various regions were stable. Some market commentators are suggesting that the nominal rise in the Brazilian price is an indication that potash prices have now hit the floor. Our feeling is that such a conclusion is premature with potash markets looking heavily over-supplied and few signs of demand improving in the short term.
The sustained low potash prices are reflecting in massively-reduced profits for producers. The two major producers in Canada, Mosaic and Nutrien, this week reported profits dropping by more than 50%, despite increasing sales volumes. In line with previous downturns in potash prices, these producers are announcing that they will idle higher cost mines to try and tighten the market and support prices.
General Market Outlook
Crude Oil prices rise moderately
Brent Crude oil prices firmed steadily this week, rising from $81/bbl to $83/bbl. The same mix of drivers is behind this price movement – geopolitical tensions in the Middle East and with Russia supporting prices edging up. Chinese fiscal intervention to support its economy has helped lift Chinese oil demand, further inflating oil prices. Natural gas prices continue to ease around the world. The European TTF gas price is approaching $7.5/MMBtu and US natural gas prices remain around $1.6/MMBtu. The low gas prices in the US are prompting some gas producers to talk of cutting back production.
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