Nitrogen
International urea market calms down, as Indian tender attracts big volumes and concerns over Chinese fulfilment of urea cargoes for previous Indian tender subside
There have been a few major uncertainties around the urea market in the past few weeks that have now been cleared up. It has emerged that one of the drivers for the surprise Indian urea tender was the concern that the Chinese government may halt Chinese urea exports, which would leave a big segment of the August Indian tender unfulfilled. This issue/risk prompted the latest Indian tender out of a perceived need to move quickly to cover any shortfall from China. The Chinese government this week confirmed that all cargoes committed under the August tender would be allowed to sail.
The September Indian tender closed this morning and had over 3.6 million tons offered against a target volume of 800,000 - 1 million tons. This huge oversubscription gives a powerful indication of the availability of urea right now, especially since very little Chinese product would have been offered in light of concerns of government restrictions for new exports. The tender price will be the determining factor around how many tons the Indians commit under this tender – if prices are lower than the previous tender ($395-400/t CFR India) then the Indians may buy larger volumes but if prices are higher, then the Indians may buy little (or possibly even scrap the tender) considering that their main motivation for this tender has fallen away.
These two factors are another example of how and why urea prices can swing so massively at very short notice. We now have a situation where there will be minimal trading activity because most players will wait to see what prices come out of the Indian tender. Buyers will also be aware that there is evidently a substantial volume of urea up for grabs and what the Indians do not buy will be looking for takers.
Regional urea prices were all over the place as the market digests these latest developments. The Middle East price rose a few dollars to stabilize around the $400/t FOB level. Urea prices in the USA and Brazil went the other way and declined by $15-20/t.
Ammonium sulphate prices backtracked this week as last week’s urea price spike proved to be an over-reaction. Amsul prices out of China declined by $3-5/t this week as cautious Brazilian buyers showed limited interest. What is encouraging amsul traders is demand emerging out of Europe. It remains to be seen what sort of volumes they will buy as this will determine how much upward impact any European transactions have on the price. If the next Indian urea tender results in a decent increase on the urea price, amsul prices are likely to follow suit.
Ammonium nitrate prices also turned down as the urea hype quietened down. It is now late in the season for European users and with grain prices trending down, appetite for top-dressing with AN is very limited. CAN trade was also quiet.
Ammonia prices firmed this week, particularly in Asia. The ongoing outage at the Ma’aden ammonia plant is adding to market tightness and prices out of the Middle East rose by $50/t this week. Most benchmark prices are now in the $400-450/t range.
Phosphates
The earthquake in Morocco triggered fears of disruptions to Phosphate exports. Although the impact looks minimal, Phosphates trading activity was lively this week.
Strong phosphates purchasing from India this week created buying interest in many other regions. The Indian DAP price rose a good $30/t to approach $600/t CFR India. Rising ammonia prices for Indian DAP producers adds support to importing more DAP instead of producing it.
Phosphate prices in Brazil were flat as buying interest is in a seasonal lull. This kept MAP prices flat in both Saudi Arabia and Brazil. Brazilian MAP stocks are very high following record buying/imports for 2023 so far, thus there is little urgency in buying more.
The Q4 Indian phos acid contract price was settled quite early, landing on a price of $985/t, $135/t higher than the Q3 contract price. This increase impacts Indian DAP producers directly, which goes a long way to explaining the surge in Indian buying of DAP this week.
Potash
Potash prices remain stable amidst weak demand and ample supply
In most regional markets potash prices were flat this week. There were some price reductions in China. Prices declined moderately in the US as low water levels in the key Mississippi River are restricting trade and traders are reducing their positions ahead of the river closure some time in October.
A number of potash vessels have now completed discharging in Durban and there are a couple more cargoes still en route. Most the recently arrived product has apparently been sold but prices of $360/t CFR Durban are being mentioned as importers look for sales for the inbound vessels. The Durban potash price remains $390-395/t for now..
General Market Outlook
Oil price hits 10-month high on supply concerns – local fuel prices likely to keep rising.
Brent crude oil climbed steadily this week to hit $94/bbl as supply cuts from Saudi Arabia and Russia tighten the market. Signs that the US may avoid entering recession and the Chinese economy showing signs that its troubles may be easing are boosting demand for oil, which further supports higher prices. These high fuel prices come at a bad time for local farmers as land preparation for the summer planting is well underway, plus all the inputs being hauled from the coast to inland farms.
Gas prices in Europe saw moderate inflation this week as the European TTF gas price returned to $11/MMBtu – the increase is being blamed on warmer than normal weather increasing electricity demand. US natural gas prices were steady at $2.7/MMBtu.
The USDA WASDE (World Agricultural Supply & Demand Estimates) report for September came out this week – this is the first report of the year to include actual US yield data. Largely as expected, the report indicated increasing maize production, with the US 2023 crop expected to be the 2nd highest ever. Yield estimates for both maize and soya were lower but the planted acreage estimate was increased. The overall production outlook was at least in line with expectations, which has meant that crop prices kept falling on this news as supply is exceeding demand.
The weaker Rand has played through the Safex values and given them a (short-term) lift. But with the international prices still heading down, it is a gloomy outlook for the upcoming season.
Latest Direct Hedge quotes for urea and MAP Swaps in USD:
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