Nitrogen
Urea price run seems to have lost momentum as market is undecided on price direction for the next month
This week saw a pause in Urea prices as the market is a bit unclear on price direction for the next few weeks. The hype generated by Egyptian outages has quietened down and traders are struggling to find good reasons to argue why prices should keep rising. It is early in the year for the Northern Hemisphere to be stocking up and Southern Hemisphere buying is ramping up in line with expectation for its spring application season.
Prices in some end-markets such as the USA and Brazil were down this week, suggesting that demand is on the weaker side and traders were very active in discounting quickly to secure sales. There are a lot of traders that are long on product after the recent surge in buying and these traders will be looking intently to keep sales moving, especially as this is a quiet period from a seasonal sales perspective.
The Brazilian price was only marginally down but buyer bids were as much as $20/t down – there are a lot of unsold cargoes destined for Brazil that will need to attract buyers, so it looks likely that prices in Brazil will return to $350/t CFR in the coming few weeks.
The Middle East price was unchanged as few deals took place with the Eid holiday underway. The Middle East producers are comfortable after recent sales volumes and some of them may also be building stocks in anticipation of Indian tender expected to emerge during Q3. If Brazilian prices do fall into the mid-$300s then the Middle East will be under pressure to reduce prices to the $320/t level.
Iranian prices have declined quickly – Iranian urea is probably the most exposed to reductions in price because it has relatively few markets open to it. The Iranian price is down to around $310 after approaching $330 in the past few weeks.
China saw a resurgence in urea demand after widespread rains across much of the agricultural areas boosted top-dressing requirements. Chinese urea stocks continue to build however while exports are limited – the market is awaiting China’s return to urea exports. The timing of this return will be one of the key drivers of price direction in the next few months.
Our feeling is that urea prices probably will fall over the next few weeks, not that there are very good or fundamental reasons for a downturn. But urea prices did rise more rapidly over the past month than were justified and history tells us that an equally rapid correction or downturn usually follows.
As often is the case, Ammonium sulphate prices followed the trend in urea and stabilized this week in the major markets. Last week’s big rise in granular amsul in Brazil translated into a small increase seen in Chinese export prices for compacted/granular amsul. Some of the smaller markets saw price increases this week for small volumes. The general outlook for amsul is for strong demand in the coming months and expectations are for higher prices going forward.
Ammonium Nitrate markets were flat this week – demand for this product remains constrained by its price premium over urea and if urea prices do fall in the coming weeks, AN and CAN prices are going to be under real pressure. Russian AN producers are struggling to generate sales as it is only Brazil that is a potential buyer of large volumes of AN, with most other major regions sanctioning Russian product.
Ammonia prices moved a few dollars here and there in various regions with no clear price direction emerging. The Middle East saw a $20/t reduction in anticipation of one of Ma’aden’s large plants returning to production after maintenance.
Phosphates
Phosphate prices rose this week as availability remains limited
Producers of phosphates have been able to push prices up across most of the major benchmarks, citing limited availability and pressuring buyers to pay a premium to secure volumes. Most of the market tightness or lack of availability is being driven by the producers themselves, by operating plants well below capacity and also holding back on stocks. The fact that the Chinese have been quite disciplined in their exports has aided this situation.
China’s phosphate exports year to date (to end May) are 30% lower than the same period last year. Prior to last year, Chinese phosphate exports averaged 700-800,000t/m – or around 3.5 million tons for the Jan-May period – compared to just 1.6 million t exported this year. Add to this the 30+% lower Moroccan exports so far this year and the shortage of product in the market becomes obvious.
A number of India DAP tenders have been conducted, resulting in around $10 being added to the Indian CFR price, which now sits at $530/t.
MAP is the big mover in the phosphate basket. Demand from Brazil is fueling the MAP price and the Brazilian benchmark rose by $25/t this week, moving well into the low $600s CFR now.
Foskor increased its MAP price for the 2nd half of June – raising its offer price to over R11,300/t bulk ex-Richards Bay. This is probably a fair value compared to import parity – as mentioned last week, the lack of liquidity at the Saudi benchmark has left the price unchanged for 2 months now, which gives the incorrect impression that import parity in Durban would be around R10,700/t.
Potash
Potash market has been subdued again this week
Potash trading was quiet once more as demand continues to disappoint and is more than covered by supplies in the market. Most of the big buying regions are well-covered in terms of stocks, therefore buying is limited to opportunistic deals where the price makes sense.
The US summer ‘fill’ programme is underway, where distributors and retailers start buying to refill their networks after delivering most of their stocks to farmers for the current season. This is a normal event in the potash calendar and no real fireworks are expected in terms of price or volumes outside of normal ranges.
The local Durban benchmark price was raised by a couple of dollars this week, however this is more suppliers positioning themselves than a sign of any real surge in prices. The threat of cheap potash imports from Russia and/or Belarus are keeping a lid on prices for the regular potash importers into SA.
General Market Outlook
Higher Crude Oil prices again this week
US economic data showing greater than expected consumption of US crude stocks and a cooling job market increasing the chances of an American interest rate cut combined to support higher Brent prices. This week saw oil adding $3/bbl to break above the $85/bbl level.
Gas markets were more stable as prices remain around $10.9/MMBtu in Europe and $2.7/MMBtu in the US.
Grains markets had another rough week, with heavy losses on international markets for both cereals and oilseeds. The expectation of good rains across the Cornbelt in the US during July has raised yield forecasts for maize, dropping the international maize price by more than 4%. Increased production forecasts for winter wheat in Argentina and summer wheat in Russia knocked almost 8% off the CME wheat price. Safex maize prices showed some strength despite the Rand improving by 2.5% against the Dollar – there is a lag between international and domestic prices, as well as reduced yields showing up as the local harvest progresses.
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