Nitrogen
Urea prices largely unchanged this week as traders await the next tenders to take price guidance
The international urea market was in limbo for another week as most buyers are sitting back and waiting for the Indian and Pakistani tenders that close on Monday 17 October. Producers have been trying to push sales in the interim because inventories are building up but buyers would rather wait and see where prices go in the tenders and look for deals from there. It is clear that the buyers are unconcerned about availability and are confident that prices have got more falling to do.
While the buyers are probably correct for the very short term about prices falling further on the back of the tenders, the situation shows all the classic signs of a urea price spike – lower prices in these tenders will prompt a buying spree and all the available tons will be bought up. Producers will then push prices up aggressively as the Q4 seasonal demand picks up. The net result is we could well see urea prices shooting up $100/t or more in a short period, which would be way in excess of where the fundamentals suggest the equilibrium price should be.
As a reminder, the Indian urea tender is seeking 1.2-1.5 million tons for shipment by the end of November. The Pakistan tender will buy 300,000 tons in its tender.
Most urea benchmark prices were either unchanged or slightly down this week. The Middle East urea price that sets our price was down a few dollars this week, however freight increased by a dollar and the rand weakening by 1.5% over the week meant that our import parity costing for urea was up R100/t or so.
Ammonium sulphate was quiet with prices of Chinese granular product moving slightly down and crystalline prices moving a dollar up. Trading activity was minimal and traders are looking forward to some tender activity in South-East Asia in the next week to try and spring the market into action. The ammonium nitrate market was even quieter with no spot trading activity seen. CAN prices in Europe were assessed as being around $30/t down, taking the price to around $800/t, which is still way in excess of urea and amsul nitrogen values.
The ammonia market has also been quiet across most regions and the lack of buying is raising pressure on sellers with inventory. The Middle East price moved down $60/t this week, with the price around $1,000/t. With the delivered price of ammonia in the Far East sitting at $900/t, and Europe and the US at around $1,200/t, there is quite a price spread. An ammonia cargo sailed this week from Saudi Arabia bound for Richards Bay, which should be 22-23,000 tons of product for local receivers. The outlook for ammonia is for prices to keep moving down, especially while the other nitrogen product prices are static.
Phosphates
Phosphate prices continue moving downwards, while the Indian phos acid price negotiations have some twists and turns.
One of the Indian import agencies agreed a Q4 phos acid contract price of $1,175/ton but this is above the Indian government’s target price of $1,000-1,100/t, so it has been limited to a single cargo. Other agencies had agreed a price of $1,200/t but these have reportedly been cancelled. The saga continues and the market waits to see where the price is pegged. It seems likely that a price somewhere around the $1,200/t mark will be used for spot transactions in the meantime.
The MAP price in Brazil fell another $10/t to hit $650/t but this price level is getting little interest. Prices in Argentina touched on $630/t and buying interest is weak. Both of these markets are in full swing for fertilizer application, so the lack of buying interest points to price resistance and also adequate local availability of phosphates.
The Middle East MAP price fell $40/t as some large sales were made to India, taking the Middle East price to $675/t FOB. With a slight uptick in freight costs to Durban and the rand losing 1.5% against the dollar, the local import parity cost still declined by almost 4%.
Potash
Potash prices in most regions continue to edge downwards again this week. Producers are now pointing to late Q4 for some price stability.
The Brazilian potash price shed another $40/t this week as prices there are now heading into the low-$600s. Brazil continues to show very high potash stocks in-country but local sales to farmers have been very slow as prices are still considered to be excessively high. Early planting indications suggest that Brazilian farmers will be applying considerably less potash per hectare than normal to their soya.
The South African price is still sitting at around $800/t before discharging and port costs. We have been getting enquiries around the price spread between the SA price and Brazil because historically the two markets have traded at roughly the same price. The lack of liquidity, in other words lack of domestic sales to growers, has meant that importers have been sitting on stock positions for quite some time. Those stocks were purchased at a much higher price, so there is the dilemma of selling those stocks at a loss and importing replacement volumes at a lower price and trying to average out. Or simply holding tight and trying to sell at close to cost. When stock has been moving so slowly locally, there is a genuine concern that the replacement cargoes may not be sold, which would only compound the problem for the importers.
General Market Outlook
Brent crude oil returns to price volatility as the latest OPEC announcements bring them into conflict with the USA. The Rand weakened further against the Dollar to R18.30.
Brent crude price rose briefly to $97/bbl as the US administration made threats against Saudi Arabia for proposing OPEC production cuts. The price soon settled back to $95/bbl where it started the week. Despite all the fuss and speculation about the sabotage of the Nord Stream pipelines, the European TTF gas price continued to move down this week breaking through $50/MMBtu level to trade currently around $45/MMBtu. Still a very high number but much better than the $100/MMBtu peak seen just 7 weeks ago as the European winter approaches. The US natural gas price spent the week bouncing between $6.4 and $6.8/MMBtu.
It was a good week for all cereals and oilseeds as international prices moved up across the board. The CME maize price climbed over 3% week-on-week, while the Safex numbers lagged a little and only rose 2.5% for white maize and 3% for yellow. Sunflower and soya were the big gainers on Safex this week, rising 8% and 7% respectively as the effects of the weaker rand came through. Internationally wheat was unchanged but gained 2% on Safex.
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