Nitrogen
Escalating Middle East crisis supports higher Urea prices
Not that the urea market needed more support but the rise in tensions between Israel and Iran and the launching of missiles by Iran into Israel lifted market fears. A number of trades already under discussion were abandoned due to the escalation in the Middle East situation as buyers chose to pull back on any business they did not consider to be urgent. Despite this, the urea market managed to gain around $5-7/t in most benchmark locations.
There is still the Indian tender that closed yesterday and the Indians will not be too thrilled that the latest geo-political turmoil has pushed urea prices up again this week – meaning that the tender offers are likely to be higher than previously thought. The Indians received 2.6 million tons of offers, which also surprised the market, considering how tight urea supply appears to be.
The Middle East price is approaching $360/t FOB and the forward price for November is quoted at $380. The market is thus firm and prices appear to be headed upwards for the next few months.
The political risk prompted the American urea market to spring to life, even though it is currently the restocking period. Barges of urea were traded actively and the New Orleans price hit a 6 month high as urea prices rose more than $20/t this week.
Brazil was surprisingly quiet this week but with its price in the mid-$360s, it is inevitable that Brazil will have to pay more to attract urea cargoes as it hits peak demand season. Brazil has been buying large volumes of Iranian urea, which trades at a $30/t discount to non-sanctioned urea, which has helped hold the Brazilian price where it is. But Iran is squarely in the fight with Israel, so Iranian shipments are extremely risky currently and Brazil could be caught short if a number of those vessels are delayed or canceled.
Egypt has seen its price move up strongly as sales to Europe have gathered pace – the Egyptian price is now approaching $390/t FOB.
China remains the one factor that could swing the urea market into balance or even over-supply that would halt the current price rise. There is no sign of China returning to urea exporting this year and signals from China point towards them directing urea into the domestic market for their autumn stock building. The probability of Chinese exports coming into the international market is very low at this stage.
Ammonium sulphate markets were subdued this week due to a major national holiday in China, which meant Chinese traders were absent. Given how urea prices have risen, amsul is now looking cheap and we expect demand to be strong in the coming months.
Ammonium Nitrate producers are battling to find customers and prices remain flat. Other than a few Southern Hemisphere buyers, most of whom have now bought for their summer season, there are few enquiries from Northern Hemisphere consumers. Rising ammonia prices are putting pressure on nitrates producers
Ammonia prices continue to rise as the latest Tampa contract price rose $30/t to $560/t CFR. The ammonia price in Europe is $600/t, thanks to the high cost of natural gas feedstock in the region. Asian prices are gradually rising towards the mid-$400s but remain cheap compared to Western markets.
Phosphates
India remains the only significant source of activity in Phosphates markets
As was the case last week, Indian demand is keeping DAP prices moving. The price in India rose by a few dollars and is now trading in the mid-$640s. Most other markets saw unchanged prices and very minimal trading volumes. Buyers have reached the point where prices are unworkable and are postponing purchases.
The Indians are currently holding a tender for 100,000t of phosphates closing early next week. While there are sure to be a number of offers, the key will be at what price the Indians can secure product.
The MAP price was unchanged again this week, with the same refrain of lack of affordability in Brazil limiting demand as crop prices are under pressure and some of the key growing areas in Brazil have been suffering from low rainfall, particularly in some soya-growing regions.
Moroccan major phosphate producer OCP made some large sales of phosphates to India at the prevailing price, with over 500,000t of DAP reportedly sold and 200,000t of TSP.
Potash
Potash prices fall in Brazil
There were some small potash price movements this week but none of them were too significant. Prices seemed to be converging a little as the South East Asian price actually rose a few dollars this week, while Brazil saw a $5/t drop. The SE Asian market is struggling as El Nino conditions have hurt this season’s palm oil crop and the potash price rise is viewed as an aberration with a small parcel being traded.
Brazil has been over-supplied with potash for months and the price reduction was not a surprise. Dry weather is adding to the negativity around soya planting and impacting potash demand. There is talk that potash consumption should pick up for November and December, which potentially could support firmer prices but with potash being so long, this seems ambitious.
The local South African potash has fallen by $5/t on the low end of the range of prices as the start of the season has been slow. The local potash price is sitting at around $315/t CFR Durban, with a lot of stock available.
General Market Outlook
Iran missile attack on Israel sends energy prices upwards.
Brent Crude oil saw a sharp spike upwards as news of Iran’s attack on Israel emerged midweek. The oil price has risen almost 10% in the past few days to trade above $78/bbl, up from the $72/bbl seen a week ago. The extent and severity of the conflict will likely drive oil prices in the coming week or two.
Natural gas prices continue to rise this week, with the jump in oil prices adding momentum. The European TTF price increased further to approach $13/MMBtu, which is putting European industrial consumers under severe cost pressure. The US gas price continues to trend up and is approaching $3/MMBtu.
As is often the case, geo-political tensions and rising energy prices were good for soft commodity values. This week lifted international grains prices, with cereals gaining over 3% week-on-week and soya gaining around 0.5%. Local Safex prices were solidly higher, with yellow maize gaining 4% to narrow the spread to white maize. The Rand lost around 1.5% to the Dollar as the Middle East situation drove currency speculators away from emerging currencies towards to the Dollar.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
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