Nitrogen
Small rebound for Urea prices – is this a blip or the start of a sustained upswing?
Urea prices firmed this week across some, but not all, benchmarks. The most active market was Egypt, where prices rallied quite strongly as traders were anxious to cover positions – quite why they should feel a need to pay higher prices is not clear when there is ample product available from alternative origins. The current surge in prices thus has a feel of being driven by sentiment and trader agendas rather than a full-blown market recovery. May volumes seem to be sold so attention has turned to June sales – at this stage there appears to be a lot of unsold product available for June but if current sales translate into significant volumes, then prices could continue to rise through June
The Middle East urea price moved up around $10/t and is sitting at around $280/t FOB. This is 5% up on the prices seen a few weeks back. Similarly in Egypt, prices have moved up sharply from $285 to $310/t FOB in just a couple of weeks.
Urea prices in the big destination markets of Europe, North and South America haven’t seen major price movements at this stage. The Northern Hemisphere is now well into planting, so fertilizer activities are focused on local distribution and these markets won’t return to buying until nearer top-dressing time. The Brazilian price moved up 4%/t during the week but there were indications of much higher numbers being floated by ambitious traders. Brazilian demand is moderate at best right now, so the higher numbers were rejected. There are plenty of unsold urea cargoes en route to Brazil, hence buyers being comfortable to wait.
China remains quiet as far as urea exports go – the export approval proves is being used by the government to throttle export volumes. The lack of Chinese product is contributing to a tighter balance between supply and demand globally. If urea does keep moving upwards, the Chinese may be attracted back into the export market.
India remains extremely well-supplied with urea after the last tender with its domestic inventory estimated to be at 11 million tons. This extrapolates to the Indians only needing to tender around September, all else being equal.
Iran has been actively selling, with sales of around 190,000t for June. The Iranian price is around $250/t, which is the usual discount versus Middle East urea.
Ammonium sulphate prices seem to have gained support from the urea increase this week, climbing a few dollars higher. There was some reasonable demand from Brazil demand for granular amsul.
Ammonium nitrate prices also rose this week as higher urea and the new season pricing from the big players in Europe lifted prices. Whether higher nitrate prices can be sustained will depend as much on the direction of urea prices as on local demand in Europe. European producers remain under cost pressure due to high gas prices in the region and are therefore operating at lower rates than usual. This is limiting the supply of nitrates, particularly CAN, so lack of availability may also support higher nitrate prices.
Ammonia markets were subdued this week, with only the Far East showing any action. The Far East benchmark price rose $20/t or so to $400/t CFR, aligning it with the Middle East price. There are some annual maintenance shutdowns scheduled amongst a number of the major export producers over the next month or 2, which may tighten the market and support firmer prices.
Phosphates
Phosphates prices were stable this week
The heavy buying of DAP by India over the past month seems to have balanced the market somewhat and stopped the fall in phosphate prices, at least for the short term. After 8 weeks of consecutive price falls, the lower DAP prices have encouraged more Indian buying and this has led sellers to hold firm on pricing. This coming week sees the annual IFA fertilizer conference taking place, which is a major meeting place for all the global fertilizer players. No doubt phosphate deals will be discussed. There should be a better indication of price direction for phosphates after the conference.
Although MAP prices were stable once again this week, it looks like demand from Brazil could be sufficient to start lifting prices. Brazilian imports of MAP for the first 4 months of 2024 were more than 35% down on the same period in 2023. Imports of other phosphate were also lower, showing that Brazilian phosphate stocks are materially lower than last year. This implies that demand for MAP imports to Brazil is likely to be firm for the 2nd half of the year, despite crop economics not looking all that appealing. The size of the Brazilian market and the inefficiency of its ports means that importers cannot delay too long or they run the risk of stocking out. MAP producers are also favouring sales to Brazil at present because of its market size, and this means that smaller markets such as SA and East Africa are struggling to get any allocations of MAP ahead of the upcoming season.
Chinese phosphates are now in full swing after a slow return – the price direction for phosphates over the next 3-6 months will hinge on what sort of the volumes the Chinese are prepared and able to export.
Potash
Potash activity remains quiet with the price outlook being soft
It was another calm week for Potash markets with minimal news as most players prepare for the IFA conference next week and are saving whatever purchasing needs they might have for their face to face meetings at the conference.
Some of the higher-priced markets such as Europe and North America saw small declines of around $5/t in their prices but this had little effect as there are no big buyers looking for product. South East Asia also saw a price reduction as importers with big positions are trying to liquidate stocks.
General Market Outlook
International crop prices increasing on the back of weather issues in North and South America
Brent crude oil overcame a midweek dip to $82/bbl as positive US economic data pushed prices up above $82/bbl once again. By the standard of recent months, it was a quiet week for energy prices overall! In a nutshell, lower than expected US inflation data has raised expectations of an interest rate cut in the US during Q3 – lower interest rates are expected to fuel increased spending in the USA, increasing demand not only for fuel and its derivatives but other commodities which all have some reliance on the cost of energy for their production.
Gas prices in Europe have remained flat this week, holding at $9.5/MMBtu. US natural gas prices have maintained their upwards trajectory hitting $2.5/MMBtu.
In a positive development for farmers, the international maize price took a big leap this week, rising by over 3%. The drivers for this higher outlook are the wet spring in US which is delaying planting, and the mixed weather in Brazil – floods in the south and a drought in the central interior impacting on yields. Soya had a similar, albeit smaller weekly rise for the same reasons.
In the local economy, the Rand enjoyed another strong week against the Dollar, strengthening by 1.5% to trade at R18.20 – the lowest rate since August 2023. The stronger Rand has helped our import parity costings for fertilizer but has hurt local crop values. Safex white maize was down almost 1% week-on-week and yellow maize was almost 2.5% lower. Sunflower and Soya were also just less than 1% down on the week. While the recent trend may be down for Safex prices, overall crop values are still healthy for South African farmers.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
|
