Nitrogen
Urea prices drop sharply across all benchmarks as Indian tender is expected to yield lower prices
The latest Indian urea tender closed this week and attracted well over 3 million tons of offers. The offer prices have not yet been confirmed but early indications are that the lowest price is under $340/t CFR India – this equates with a Middle East FOB value of around $320/t. This price had a ripple effect through the other urea benchmark locations, with prices dropping between $15-30/t. The tender price will be confirmed in the coming week.
The Middle East urea price fell more than $20/t to trade at just below $330/t FOB – this number is anticipated to reduce further once the Indian tender price is finalised.
The bull run in US urea prices came to an end this week as the price dropped around $15/t. The US market remains the most expensive for urea as the price is still sitting in the high $300s and with the US now looking adequately supplied for the short term, it seems prices there will decline rapidly in line with the wider global urea trend.
The Egyptians aggressively discounted their prices this week, down to Middle East levels and even lower in some cases. This generated a surge in sales to Europe and North America. This may prove to be a shrewd move as the Egyptians have a lot of urea to sell in the next month and being forced into the Indian tender could lead to even lower netback values for them.
Brazilian urea prices also dipped sharply this week as demand remains weak and affordability of urea versus present maize prices in Brazil is a major constraint. The price came off by around $20/t and the Brazilian price is approaching $330/t CFR, which means low prices for any of the producers targeting that market.
Iran has also joined the discounting frenzy with the price dropped to $290/t FOB.
The urea market looks to be heavily oversupplied and with China poised to start urea exports, plus the high inventories in Iran, Egypt and Russia all looking for a home, urea prices are set for further declines.
In local terms, the urea price has fallen by more than R1,000/t in the past month and provided the Rand does not collapse against the Dollar, we should see prices falling below the R7,000/t level in the coming month.
Ammonium sulphate markets are following developments in urea prices closely, with many buyers delaying purchases in anticipation of even lower amsul prices to come. South East Asian demand for amsul is reasonable and a number of buyers are getting ready to secure cargoes once the anticipated lower urea price comes through and presumably depressed amsul prices too. Brazil is showing little interest in amsul and the American and European buyers are mostly covered already.
Ammonium nitrate markets remain lacklustre as the traditional markets are all showing lower than normal demand for AN for various reasons. Brazil would normally be the target for East European AN producers at this time of year as the European season winds down – but as mentioned earlier, Brazilian demand is weak and planting conditions for Safrinha maize are not conducive to AN usage because of late season rains. CAN prices are also sliding down due to cheaper urea and low buyer demand across Europe.
Ammonia markets were subdued this week with little spot trading reported. Most prices were unchanged, apart from the Middle East benchmark, which dropped $25/t to now trade at below $300/t FOB.
Phosphates
Traders are actively positioning Chinese Phosphates into major markets
This week saw Chinese DAP prices fall another $5-10/t as traders have been competing with each other for Chinese cargoes as the export ban from China falls away. This in turn led to the Indian DAP price declining by more than $10/t. The Indian DAP price is now around $575/t CFR. Traders have been offering prices as low as $560/t CFR India, gambling on being able to secure Chinese product at even lower prices. It certainly appears that the dam wall on DAP prices has burst and a period of declining prices is starting.
The major Western markets haven’t seen much movement on DAP prices yet but it is now quite late for those markets to be making largescale phosphate purchases. Any new deals are likely to see lower prices being achieved.
MAP deviated from the DAP trend this week, with Saudi producer Ma’aden reporting a $5/t increase in MAP prices. Brazil remains quiet and MAP prices there were unchanged this week. Some Chinese 11-44 MAP cargoes have been sold to Brazil this week.
Potash
Potash markets were quiet this week as the Brazilian potash price stabilises
The Easter holidays subdued trading in Brazil and the run in the Brazilian Potash price seems to have ended. The rising price has discouraged a number of buyers and with ample potash stocks across the country, buyers can afford to play a waiting game and see if they can squeeze prices back down to below $300/t CFR.
Potash prices in North America and Europe are expected to decline gradually as the main buying season is close to completion ahead of spring application. Both of those markets remain $40-50/t higher than Brazil and South East Asia, so there is scope for lower prices.
As the new Indian fertilizer year begins on 1 April, chatter around the Indian annual potash contract price is picking up. Nothing has been finalized yet but the general view is that a price of $280-290/t CFR India should be achievable. This may well cause prices to slide in other major markets as none of them have prices quite that low.
General Market Outlook
Energy prices on the rise again as OPEC indicates tighter supply
Brent Crude oil closed out the week strongly with prices touching on $87.5/bbl due to a tighter supply outlook. Traders are taking the view that the OPEC group is going to stick to its agreed supply cuts and there is speculation that the Ukrainian drone attacks on more than a dozen Russian oil refineries may start to have some impact on Russian oil output. Natural gas prices in Europe remain below $9/MMBtu. The US natural gas price edged up a little this week to $1.8/MMBtu.
The Rand lost a few cents against the Dollar this week, trading at R18.94.
South African maize prices have consolidated their recent gains – white maize is holding firm above R5,200/t and yellow maize is stable at R4,200/t.
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