Nitrogen
Urea market runs red-hot this week as producers align to keep prices running up
All regions saw double digit percentage increases in urea prices this week as sellers were able cominate negotiations. The next Indian urea tender was confirmed on Monday and that provided the ammunition for suppliers to bid prices way up.
The tender closes for offers on 9 August and seeks around 1 million tons. Expectations are that the Chinese will provide at least 500,000 tons of that requirement with the economics looking favourable for the Chinese. There is a potential sticking point for the Chinese which is their own domestic season will reopen towards late September and there is a possibility of the Chinese government intervening and restricting urea exports to support the domestic market.
The next question is where the remaining 500,000 tons comes from. The Middle Eastern producers are saying that they’ve sold most of their August volumes and the Russians seem similarly satisfied with their sales bookings for August. While the extent of their sales is probably being exaggerated, it does suggest that the Indians will be facing higher prices than they hoped and they may have to settle for lower volumes. Early indications are that the tender may yield a price of $420/t CFR India – a good $140/t higher than the $280/t in the last tender just a month ago in June.
The Egyptian producers continue to focus on Europe and prices ticked up steadily during the week, jumping $10/t a day and ending the week touching on $470/t fob Egypt. In reality the Egyptian situation has been intensified by government cutbacks in gas supply, because extremely hot weather has required increased electricity production from gas. Thus Egyptian production cutbacks have tightened urea availability and the price has reacted accordingly.
The suggestion that Brazilian buyers would resist prices above $400/t was kicked to touch as the price ran up to $420/t this week with solid volumes being traded. The Middle East price leapt up $45/t to hit $400/t, which is where it was in January this year.
Buying interest in South Africa is starting to pick up but potential buyers have been reporting an absence of urea cargo availability. This latest spike in urea prices is going to make finding urea more difficult as traders will be selling to the highest bidders. South African buyers hoping for bargains are going to be disappointed. At this point with the season looming, buyers will need to grab what they can get and even then, delays to delivery should be factored in.
Unsurprisingly Ammonium sulphate rode in urea’s slipstream, with prices continuing to rise. The increases were moderate but there is clearly momentum behind prices with Southern Hemisphere buyers now active.
Brazilian buying continues to support Ammonium nitrate prices as Russian AN jumped by $75/t, which means it has doubled in just 2 weeks. With urea achieving higher numbers in Europe, CAN has seen some strong price support to rise by €25/t hitting €320/t this week.
Ammonia finally joins the rest of the nitrogen stable with prices moving up this week. The upward movement is quite slow so far, with increases ranging from $10-25/t across the various regions. Ammonia is now pushing above the $300/t mark – but continues to lag urea by $100/t. Further upside is probable in the coming weeks.
Phosphates
Phosphates market showing early signs of firmness as small price increases were seen in some regions
While we have seen MAP prices slowly rising over the past few weeks, DAP has generally remained weak due to oversupply and shrewd negotiating by the Indians. This week saw DAP prices take some small upward steps. The increases were generally less than $10/t, which is only a 2% rise in a $450/t commodity. As is usually the case with any DAP price changes, the Indian market was the primary driver – reduced availability of Chinese exports was blamed for the $4/t gain in the Indian DAP price. While there are no fireworks in phosphates prices just yet, the upturn in prices may well be significant and be the end of the decline of phosphates that has occurred since April last year.
The Chinese phosphate exporters have apparently already filled their entire export quota for Q3 and are therefore raising their asking prices safe in the knowledge that losing some sales will not hurt them too much. With nitrogen prices on a very steep run and ammonia prices starting to strengthen, phosphates may see some price support for the next month or so. The big question remains whether the big 3 exporters, Morocco, China and Saudi Arabia keep their export volumes low or whether firmer prices cause them to increase their sales – this will ultimately decide the price direction for phosphates for the rest of the year.
Strong Brazilian appetite for MAP supported an increase of a few dollars this week but sellers are watching the end of the Brazilian buying window closely and not wanting to be caught with unsold product. The Brazilian price helped drag the Saudi MAP up by $2/t as well – the stronger Rand balanced this out in our import parity calculation. When we consider the value of a unit of P, the huge urea price move meant that deducting the value of nitrogen from MAP leaves the unit of phosphate significantly cheaper this week.
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Potash
Potash prices gains in Brazil see South African prices rise too
The ongoing strike at the Canadian port of Vancouver has created some bullishness around potash prices this week. Positive agricultural sentiment in Brazil has supported fertilizer sales in recent weeks and the withdrawal of the Russians form Ukraine-Russie grains deal has driven crop prices high again. The Brazilian potash increase is small at $5/t but after continuous declines since June 2022, the potash producers are thrilled with any increase they can get.
Unconfirmed reports indicate that the Russians have agreed a contract price with India for $319/t CFR for the remainder of the year. The Indians had reopened the contract after their original contract price of $422/t was completely undercut by the Chinese securing a contract price of $307/t.
The South African price quote for Durban rose by $7.5/ton, supposedly driven by strong demand emerging. What does remain valid is that potash imports to date are lagging historical levels and there is substantial risk of shortages at the beginning of the season. A number of potash cargoes have reportedly been booked, which considering the usual lead-times should see them arriving in early September. A key flag to watch then is the probable shipping congestion in Durban as the vessel lineup for spring is growing every day.
General Market Outlook
Rand managing to recover gradually against the Dollar, while the collapsed Ukraine:Russia grain deal sees crop values soaring.
Brent crude oil had another week of rising prices as OPEC+ production cuts and the prospects of Chinese economic stimulus gave reason to expect higher oil demand. Oil saw a 5% gain over the week, going from $80 to $84/bbl. Gas prices in Europe followed a rollercoaster after the EU TTF price dropped to almost $8/MMBtu and then spiked to $10.5/MMBtu and is closing the week at $9.5/MMBtu. US natural gas prices spent the week at $2.7/MMBtu before shedding a few cents to close at $2.6/MMBtu.
Grain prices were generally strong again this week, following the Russian withdrawal from the Ukrainian grain export discussions, plus the Russian artillery and air strikes against Ukrainian grain export infrastructure increased concerns about Ukraine’s prospects of exporting any of this summer’s crop. Some profit-taking towards the end of the week saw prices taper off with a lot of contracts being sold. With the US Dollar weakening and fears of an American recession also reducing, the outlook for commodities in general is more optimistic and prices have been increasing.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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