Nitrogen
Surprise Indian urea tender upsets urea market and Chinese government curbs exports, which sends prices climbing
The Indians managed to surprise the Urea market once more by issuing a tender for 800,000 – 1 million tons that closes on 15 September. The urea market had assumed that the Indians wouldn’t look for more product for a month or so after their recent tender because of their healthy domestic stock urea situation. It seems that the recent price dip encouraged the Indians to try and lock in product at what is likely to be the best/lowest price for the remainder of 2023.
The urea bids in this tender will be interesting to follow because the Chinese government intervened this week to halt urea exports. They put a freeze on export permits until 11 September when “an official government decision” regarding urea exports is expected. The cause for this intervention has apparently been the rise in domestic Chinese urea prices following the sales of 1.1 million tons to India under the recent Indian tender. This price rise in China is likely to be short-lived as September-October is a low demand period, so we do not expect any massive restriction on Chinese urea exports. However the Chinese government is always unpredictable, so this is a flag that needs close watching in the coming few weeks. What can be concluded for now is that Chinese participation in next week’s Indian tender is likely to be minimal. With a major urea supplier sitting out, the remaining bidders could well take a bullish position on price and the Indians may be facing much higher prices than they hoped.
The Middle East urea marketplace was topsy turvy amidst all of these developments – on the low end, the urea price fell by $20/t but by the end of the week, price offers were firmly at the $440/t level. The $80/t spread between low and high in the Middle East leaves an average of $400/t, which is $20/t up on last week but in reality the increase is greater as not much product is available below $440/t.
With urea prices jumping up, traders targeted $100/t increases in Brazil but buyers were firm in rejecting such numbers. The limited tons that did trade showed an increase of around $60/t.
Trade data to the end of July was published this week, which shows South African urea imports of only 225kt so far in 2023. Imports for the same period for 2021 and 2022 averaged 400kt, so this is further evidence of the pending shortage in local urea availability at present.
Ammonium sulphate prices were sparked to life by the unexpected movements in urea. Granular amsul spiked upwards by 20% and are approaching $200/t FOB China. Crystalline product rose by 15%, with the price differential between granular and crystalline returning to more normal levels of around $20/t. As was the case with urea imports, amsul imports into South Africa are a good 40% behind the same Jan-July period last year – a risky scenario with supply about 85,000t behind where it should be.
Ammonium nitrate prices have enjoyed the resurgence in nitrogen values, with the European market showing late season interest after their summer holidays. Russian (Baltic) AN prices gained $20/t this week and returned to the $250/t level. Traders have targeted AN sales into Brazil but there is very little interest from the Brazilians at these higher prices. CAN prices in Europe have firmed too with a €20-25/t gain.
The Ammonia market is struggling to get prices to move upwards, despite fundamentals all pointing towards higher pricing. Availability is tight in the Eastern Hemisphere, with the massive Ma’aden ammonia plant down for a few weeks, and demand for ammonia emerging from India.
Ammonia trade data for South Africa was quite interesting, showing that ammonia imports for January to July were only 50kt compared to 80kt for the same period last year. An explanation for this could be that Sasol’s ammonia production was up this year but the opposite has been the case. With Foskor running at its usual rate, this leaves Omnia as the big reduction in imported ammonia consumption. A quick glance at ammonium nitrate (explosive grade) trade into South Africa shows that 20,000t has been imported this year (imports are usually zero) and exports (which go mostly to Zambia) are also down by 20,000t – the net result of this indicates that South African AN production was 40,000t down in the first 7 months of the year. Not a healthy sign for the manufacturing and mining sectors. This shortfall in AN production does partly account for the reduction in ammonia imports although the rest of the explanation has to be that local fertilizer production is also lower. Coupled with the huge reduction in nitrogen fertilizer imports thus far in 2023, the picture for local fertilizer supply is painted with red warnings!
Phosphates
Indian DAP buying was the main action in the Phosphates sector this week, with other regions all stable.
Most regional phosphate price benchmarks were unchanged this week as the lull between Southern and Northern Hemisphere demand continues. Fairly negative outlooks for crop prices and thus planting in the Southern Hemisphere is impacting phosphate demand as prices are seen as being on the limit of what is viable for farmers.
Indian buyers were prepared to up their bids by $5-15/t for DAP as they seemed to be spooked by events in the urea market and picked up their buying. With Indian DAP producers struggling to source ammonia, there has been increased focus on DAP imports to cover their domestic requirements.
MAP prices were stable for the 3rd week in a row, with the Saudi and Brazilian prices sitting on either side of the $500/t level. With soya being the one crop showing strength, demand for MAP for soya in Brazil may support MAP prices in Brazil despite the expected reduction in international phosphates prices in the coming months.
South African import data for MAP reveals an even more worrying picture than for nitrogen fertilizers. For Jan-July, SA imports of MAP are 60% down on the same period last year, with around 60kt having been imported versus 150kt arriving by July last year. South Africa usually imports around 250,000t per year – unless phosphate demand is massively down this season, South Africa is going to be very short of MAP.
Potash
Potash market was generally quiet, with some price weakness showing in Brazil
The potash market is characterized by a few producers, Canpotex (Canada) and K+S (Germany) trying to push prices up following some supply disruptions that they have suffered. On the buy side, buyers see weak consumption and feel no pressure to consider any price increases at all. The outcome of these activities is that the price is unchanged in most locations this week.
Potash traders are pinning their hopes on maize prices and therefore plantings in Brazil but so far there is little sign of their hopes coming true. In fact Brazilian potash stocks remain high and prices look more likely to soften in the coming weeks than to increase.
It is probable that the ambitious price ideas of potash sellers are a tactic to position prices high in anticipation of Q4 demand from the Northern Hemisphere. History shows that this is a dangerous game if sellers are overly greedy as potash demand is notoriously fickle and high prices can easily cause consumers to cut their volumes.
Potash imports into South Africa for the Jan-July period told the same story as N and P – imports are far behind where they should be for a normal planting season. So far just under 100kt of potash has been imported against a normal consumption total of 370-400kt. High potash prices and indifferent crop economics will undoubtedly limit potash demand this coming season but the local market looks hugely short of product, despite the cargoes expected to arrive this month.
General Market Outlook
Crude oil price remains elevated and Rand keeps getting weaker.
Brent crude oil hovered in the $90/bbl range this week as market tightness supported prices touching on $90.5/bbl midweek, before weaker demand pushed prices back below $90/bbl. The European TTF gas price trended sharply down this week as warm weather in Europe and high storage levels outweighed the risk posed by a potential strike at an Australian LNG site. The TTF price has fallen from $11/MMBtu a week ago to trade at $9.8/MMBtu. US natural gas prices eased down slightly this week to close at $2.6/MMBtu.
The Rand took strain again this week as a combination of a stronger Dollar and higher levels of loadshedding caused a Rand sell-off.
USDA (US Dept of Agriculture) data for September is due to be published next week and there is a growing opinion that US yield estimates for maize and soya will be revised down due to unusually hot and dry growing conditions in the US Corn-belt through August. This would support a stronger outlook for maize and soya prices, which would be welcome news for South African growers.
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