Nitrogen
Nitrogen prices continue to rise strongly across all markets
Urea producers are claiming to be mostly sold out for the month ahead and prices keep moving upwards. The futures market is pointing to $400+ prices by Q4 (see section later in this report), which would appear to be higher than the fundamentals indicate but as always, urea prices are very responsive to sentiment!
The Indian urea tender is at the centre of discussions, as these tenders usually are – the tender is now being delayed because of the rapid rise in prices over the past weeks. In a classic “chicken and egg” scenario, how much of a role has the tender played in supporting the price rise and if the tender is further delayed or even scrapped, where will that leave urea prices? The Chinese are expected to be the main participants in the tender and have reserved stock for it.
Egyptian prices have the most momentum and moved well above the $400/t threshold, having been <$300/t in June. By comparison the Middle East urea prices have risen about $90/t in the same period – the price ex-Arab Gulf is just over $350/t this week. Our expectation was that urea prices would top out in the mid to high $300s later in the year but it seems that prices are set to move up faster and further than we thought.
Brazil is continuing to be an active urea buyer with prices moving a good $40/t up this week to $390-395/t CFR Brazil; Brazilian sources are suggesting that $400/t is seen as a ceiling and buyers will push back at prices above this mark.
In conclusion, urea prices clearly have momentum behind them and look set to rise through August. We have probably seen the lowest prices of the year and any bargain hunters that didn’t buy urea in June have missed the boat for this year. With a packed import lineup and port congestion likely to be an issue in the coming 2-3 months, we expect chaos on fertilizer imports and with at least 500,000t of urea imports still needed, South Africa may be a seller’s market for this season.
Ammonium sulphate prices kept their upward trend this week as both grades saw a $5/t increase. As has been the case for a few weeks, the amsul price support is coming from Brazilian buying and from the general increase in nitrogen values thanks to strong urea prices.
Ammonium nitrate was the most active nitrogen product this week, with the price of Russian AN out of the Baltic rising by almost $60/t. Russian AN values are now touching on $200/t FOB Baltic – this price adjustment is due to higher nitrogen/urea values. CAN also moved although by a much smaller amount, only increasing by around €10/t to approach €300/t in Europe this week.
Trading activity in Ammonia remains slow but indications are that prices are poised to start rising in sympathy with the rest of the nitrogen products. The Middle East ammonia price rose by $40/t to hit $275/t this week but other regional prices remain flat. Considering that ammonia is trading at 75% of the value of urea, it is fair to assume that ammonia prices have quite a lot of possible upside in the near future.
Phosphates
Phosphates prices were more stable this week as it appears the bottom may be near.
DAP prices saw a resurgence in the US this week as summer fill programmes led to considerable buying activity. Given that much of this buying is a refilling exercise and most of the product will not be consumed next year, this surge in buying suggests that American distributors believe that DAP pricing is currently favourable and delaying purchases to Q1 would mean paying a higher prices then.
While DAP prices were rising in the US and flat elsewhere, MAP prices were supported by ongoing Brazilian purchasing. The MAP price in Brazil rose by $10-15/t, dragging the Saudi MAP benchmark price up by the same amount. MAP has risen around $40/t in the past month, which suggests that the price decline may be over. As MAP prices are currently wholly reliant on the strength of Brazilian buying and Brazil has sizeable MAP stocks, the biggest driver of MAP prices will be how long Brazil maintains the current rate of purchasing. Brazilian has an incredibly long lead-time for fertilizer imports, around 3-4 months from ordering to delivering on farm, thus there is not much of a window left for MAP imports for the summer rainfall season.
OCP in Morocco reported some additional sales to Europe but its July sales tally is less than 300,000t out of more than 800,000t of production for the month. Should OCP focus on raising sales volumes, then phosphate prices will come under further downward pressure. For now it looks like there should be some price stability in phosphates for the next few weeks.
Potash
Potash prices keep falling but the Canadian port strike is raising expectations of the market possibly tightening
Firstly, an apology for the incorrect potash price published last week. The Durban CFR price was reduced by about $30/t, which reduced the import parity cost of potash by R1,000/t down to $7,350/t – the 6% strengthening of the Rand made a big contribution too.
The strike at the Canadian port of Vancouver, where the majority of Canadian potash exports originate, was supposedly resolved a week ago. However the start of this week saw the strike being resumed, which has put a stop to all Canadian potash exports so far in July. The Canadian export consortium, Canpotex, has now withdrawn all offers of potash for July. This freeze on Canadian exports may also have halted the renegotiation of the Indian contract price.
In South East Asia, some potash tenders yielded surprisingly low values, with the lowest offer reported at $290/t CFR. This would be below the shock Chinese contract price of $307/t if indeed correct.
Brazil saw a small increase this week, with a $5/t increase on the high end of the range translating to a $2.5/t increase on the average price. The end of largescale imports to Brazil for the summer season is now in sight and Brazilian buying demand is likely to slow substantially come August. Countering this negative influence on pricing is the Canadian hold on potash exports.
General Market Outlook
Energy prices firm slightly, while the collapse of the Russian-Ukraine grain deal sends crop prices soaring.
Brent crude oil held firm this week holding at the $80/bbl level. The oil market is balancing mixed economic data leading to weaker demand against increasing production cutbacks from Russia. The Chinese government has indicated that it will intervene to boost its economy following poor economic data for Q2, which is likely to support higher oil prices. The EU TTF price increased moderately to approach the $9/MMBtu level which was caused by the heatwave in Europe increasing energy consumption. American natural gas prices closed the week at $2.8/MMBtu after opening at $2.5/MMBtu.
The collapse of the latest discussions between Russia and Ukraine around grain exports from Ukraine caused a massive rebound in maize and wheat prices this week. The CME corn price regained almost 9% week-on-week, while CME wheat leapt up 16%. With the Rand holding steady at R18 to the dollar, Safex values all strengthened considerably this week – white and yellow maize led the way with 11-12% increases.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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