Nitrogen
Next week’s Indian tender is expected to push Urea prices down significantly
The anticipated Indian urea tender has been confirmed and bidding closes on 27 March, with delivery of urea to be complete by 20 May. The tender has been the centre of attention with plenty of speculation around what the price will be and what volume the Indians will secure. Given the delivery window, the Chinese are effectively ruled out of participation, which leaves the Russians and Middle East producers as the main bidders – the Egyptians and Indonesians may participate too but the extent of their involvement is likely to determined by the tender price. If they find the tender price too low, then they may offer little or no product, although both locations have stock to shift and would be keen to reduce their inventories. The latest chatter suggests that the Indians could buy around 750,000t and price estimates indicate around $355-360/t CFR (or $340/t FOB Middle East) but this value could be as much as $30/t lower, which would see the Middle East price at $310/t FOB.
The Middle East urea benchmark dropped almost $10/t this week and sits at $350/t FOB presently – trading was mostly quiet as producers prepare for the Indian tender. There was reasonable buying interest at lower numbers but producers were reluctant to let the price drift too low over concerns where it would leave the Indian tender price. Around 250,000t of Middle East urea is expected to go into the Indian tender.
The US market remained the only exception to the global trend of declining prices. Given that the American demand is for prompt tons for March, the end of the US price rally cannot be far away and the general reduction in global prices will probably be reflected in US prices from April.
Brazilian urea prices moved down too courtesy of Russian sales into that region – Brazil is sitting at just above $350/t CFR, making current Middle East prices unworkable. Demand in Brazil remains low, so buyers are not under pressure and will watch the Indian tender with interest with a view to much lower prices being offered to them in April.
Egyptian producers have suffered in the present urea downturn as European demand has been particularly weak. Egyptian prices are now lower than Middle East, which is unusual, and this may well encourage Egyptian producers to participate heavily in the Indian tender.
The Iran urea production capacity is reported to be running at full capacity, which will not be happy news for other producers, given that Iran trades at a discount because of the sanctioned status and more volumes being sold into the international market means greater oversupply and thus price pressure. The Iranian urea price is assessed at around $310/t.
The negative outlook for urea prices is impacting Ammonium sulphate prices, which took a good 8% dip this week. Chinese granular amsul is now below $140/t FOB and crystalline capro-grade product is at least another $10/t cheaper. Some Brazilian buyers apparently bought some decent volumes at even lower prices but these weren’t confirmed.
Ammonium nitrate prices are also under substantial pressure – very little trading action and buyers content to sit back and let the falling urea market force AN prices down. Russian producers have a growing inventory problem with Europe not showing much interest and no demand from Brazil either. Around 70% of the European CAN usage is reportedly complete, so producers are focusing on the remaining potential demand. A positive of the ongoing poor early spring weather is that the usage of CAN (nitrates) is advantageous over urea, although this certainly doesn’t support CAN prices.
The ammonia market seems to be in equilibrium for now, with prices at all major benchmarks stable this week. Most major exporters are indicating adequate sales in place for April, suggesting that prices shouldn’t be under major downward pressure in the short term – but the overall downward direction of nitrogen values, thanks to urea, cannot be ignored. Longer term, the ammonia market looks to be under structural pressure as the Russians have announced the scheduled opening of their new ammonia export terminal in June. This terminal is effectively the replacement for the Yuzhnyy terminal, which is in the Ukraine and therefore unavailable for Russian ammonia exports. The new terminal will see up to 3 million tons of Russian ammonia returning to the market.
Phosphates
Phosphates prices start to fall, led by lower DAP prices into India
China’s return to phosphates exports has been the catalyst for prices to start drifting lower. The Chinese DAP price was $20/t lower this week as Chinese exporters start to chase business. The overheated American market has also lost steam and US DAP prices were down more than $60/t to align more closely with international prices.
There is an Indian DAP tender awaiting bids but a number of deals were done outside of this tender – the Indian price was down $5-10/t, which is the first movement seen in the Indian price in 5 months. Another $15-20/t reduction is expected under the latest DAP tender. A significant drop in the Indian price is almost certain to herald lower prices across all other regions.
MAP continues to be a little tighter than DAP and traders were able to squeeze the Brazilian price up by $5/t this week. The sales were for small lots of buyers looking for prompt product – it is unlikely that there is demand for big volumes nor an appetite for higher prices. Ma’aden from Saudi has reported sold 75,000t of MAP for April shipment to Brazil under a price formula, indicating increased volumes moving towards Brazil. The Saudi MAP benchmark remains unchanged again this week, keeping our Durban import basis price unchanged apart from the slight Rand devaluation.
Potash
Further gains in the Brazilian Potash price in otherwise quiet trading
The Brazilian Potash price was assessed at $5/t up again this week but this is being driven by sales of a few small lots and overall the market remains subdued. This price movement will offer some encouragement to producers to push more aggressively on prices but this is unlikely to be successful unless unexpected demand emerges. The import lineup for March arrival into Brazil is more than 1 million tons, indicating ample availability of product in the ports.
There are various tenders open for potash into South East Asia with suggestions that the price could be $5-10/t lower than the prevailing prices – which would mean a price of around $300/t CFR. Similarly talks around the Indian annual potash contract price are pointing to values of $290-300/t CFR – most participants in these various negotiations are unwilling to confirm numbers yet.
The South African potash reference price is unchanged at $330/t CFR Durban.
General Market Outlook
Crude Oil and Grain markets continue to show strength
Brent Crude oil had a volatile week as prices briefly rose above $87/bbl before returning to the same price level as last week. Brent crude oil is presently trading at $85.3/bbl. Gas prices in Europe rose marginally this week, with the TTF gas price climbing from $8.3/MMBtu to $8.8/MMBtu. US natural gas prices remain very depressed, with 10% decline to $1.6/MMBtu this week.
The Rand had a quiet week against the US Dollar, closing yesterday at R18.82, just a a few cents weaker than last week.
Grain prices around the world enjoyed further support with most of the major products rising this week. Maize, soya and wheat all registered >2% increases on the US CME index. Safex prices were more mixed as some local profit-taking, combined with the Rand movement kept local prices steadier.
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