Nitrogen
Urea prices were fairly stable this week as demand slows down. The supply-demand balance for urea remains well-balanced as the next Indian tender is expected in 2 weeks’ time and Brazil is expected to pick up its buying programme during this quarter.
Last week’s price rebound has scared urea buyers away this week and most buyers have reasonable stock levels after all of the buying activity in the past 3-4 weeks. Urea producers are holding prices at current levels on the basis that gas prices in Europe are extremely high. Sellers are well-aware that Brazilian buying will increase as its summer rainfall season approaches and the next Indian tender is on the horizon, so buyers will need to enter the market in the near future.
There is also a question mark about the availability of Chinese urea. Chinese urea exports have been increasing but at a slow pace and there are expectations of China imposing a temporary export quota on urea. Exactly what this might entail is unclear but the uncertainty has chased away most potential buyers of Chinese urea in the short term. Traders looking to offer in the upcoming Indian tender are looking at Middle Eastern urea and ignoring China for now.
The Middle East urea price was unchanged this week but the Brazilian price jumped up around $50/t, which brings it into line with the Middle Eastern price. The urea market appears to be set for some increases through July.
Ammonium sulphate prices rebounded very strongly this week as the recent bounce in the urea price translated into buying interest in amsul. The ammonium nitrate market in Europe saw producers raising their price quotes on the back of rising costs due to gas prices going through the roof. But buying interest at these higher prices is minimal and the European season is nearing its end.
Apparently a cargo of Russian CAN has been booked to South Africa at a price reported to be in the low $500s CFR. This is about $200 cheaper than the equivalent European product delivered to Durban but still a huge premium over urea. With Omnia and Sasol producing less CAN than in former years, the local market has to choose between paying a big premium for imported CAN or switching to alternative products, such as urea. South Africa has no sanctions against Russian fertilizer but the parties involved will be wary of the currency used for payment and avoiding upsetting the USA and EU.
Ammonia prices were generally flat this week but the spike in the EU gas price has reduced expectations of any substantial downward movement in prices for now. The outlook for ammonia prices is downwards as demand in many markets remains soft.
The import parity cost of urea moved up about 1% this week on the back of the rand weakening almost 2% against the dollar. Freight rates between the Middle East and Durban declined around $5/t which partially offset the weaker rand.
Phosphates
Phosphates buyers push more aggressively for price cuts, while the producers continue to sit tight and hold prices firm. Weak demand and cheap Russian phosphates saw the Brazilian phosphate price slide.
With phosphate prices seemingly stalled at current levels, the market is awaiting the Chinese and their decision around phosphate exports. China has been exporting phosphates but there is not yet much sign of the big volumes of exports that the market hoped for after the Chinese ban on exports. Prices for phosphates in North America are declining weekly as the application season is rapidly ending. Asian and African markets are reluctant to buy at current prices, so phosphate demand destruction is continuing in much of the third world.
The main players in the international phos acid trade, India and Morocco, were unable to agree on a contract price for Q2. In a nutshell, the Moroccans were holding out for a price around $2,000/t versus the Indians insisting that they would pay no more than the $1,530/t agreed in Q1. The net result was that most volumes that were sold to India were a rollover of the Q1 price – in other words the Indians got their way. There are now indications that the Moroccans might play hardball with the Indians and withhold phos acid from Indian buyers who reject the Moroccan price. The Moroccans believe that they can consume any acid that the Indians don’t buy and thus have little pressure to discount to ensure export sales. Should this happen, the current global phos acid pricing structure could break down and producers may be able to achieve much higher prices for phos acid versus MAP and DAP than is currently the case. If this comes to pass, it will place South African liquid fertilizer producers and consumers in a very difficult place because more expensive phos acid will make liquid fertilizers considerably more expensive than their dry fertilizer equivalents..
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Potash
It was another quiet week for potash prices as sentiment around declining demand continues to grow. With potash supply to many markets constrained due to the Russian and Belarussian sanctions, lack of potash availability is keeping prices at current levels.
Brazilian potash stocks remain very high due to all the Russian cargoes received this year, so prices there are under downward pressure. Reports are now emerging of Russian potash cargoes being directed to the USA. The signs appear to be pointing for the supply of potash to continue easing, which should pressure prices downwards. We are approaching the end of the annual lull in fertilizer demand (Q2) and as buying activity from the southern hemisphere picks up, we will soon see whether producers are prepared to discount to ensure decent sales volumes or whether they are insistent on maintaining current prices and taking their chances on demand being negatively impacted.
General Market Outlook
Crude oil prices continue to bounce around although the week-on-week price remains roughly flat at $112/bbl.
Brent crude oil touched $118/bbl mid-week before sliding back to $112/bbl today. With expectations of a global recession seeming to grow every day, oil analysts are suggesting that crude oil will find a floor price at $100/bbl. The US gas market had a wild ride this week as prices rose from $6.2/MMBtu up to almost $7/MMBtu, before collapsing to $5.7/MMBtu late in the week. This represents a price spread of almost 25%. In Europe gas consumers had no relief as the TTF gas price sat above $40/MMBtu and appears likely to stay there until some solution is worked out between European pipeline technology vendors and the Russian government.
US growing conditions continuing to improve have been the driver of falling international maize prices, which slumped around 5% week-on-week. The local Safex price for maize moved in the opposite direction, primarily due to rand weakness. US soya prices moved slightly up as the latest USDA estimates suggested fewer acres planted to soya than previously forecast. On the Safex, sunflowers and longer dated soya futures moved up this week.
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Latest Direct Hedge quotes for urea and MAP swaps in USD:
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