Nitrogen
Urea prices mostly easing downwards, although American market is showing some strength
The US urea market remains the only region seeing higher urea prices at present. American prices are being driven by relatively strong short term demand and a shortage of immediate product. Prices for April are much lower than prompt product but if this demand continues, US prices for April may well start to rise. With other markets being slow for urea, more cargoes are likely to be directed to the US, which will reduce prices – unless there is a surge in prices globally, which is a very low probability at this stage.
The rest of the world sees urea differently to the Americans as prices continue to fall slowly in all the other regions. Brazilian demand remains low as the Safrinha season is now underway and the Brazilians will be fairly inactive for the next quarter or so. This is pushing Middle East prices down, as the Arabs’ offtake from Australia and Thailand also quietens down. Both Brazil and the Middle East saw their benchmark prices down around $5/t this week – sitting at around $390/t and $370/t respectively.
Europe remains quiet and this has forced Egyptian urea prices down as the Egyptians have to look to other markets, all of which yield lower netbacks for them than Europe.
The Russians were able to place urea into Mexico, helping them keep sales moving and managing their inventory build-up. The Russians have faced competition from Iran as the sanctioned countries compete for markets such as Turkey. Indonesia scrapped a urea tender due to bids being unacceptable low at $355/t fob. So the picture remains one of ample product and producers delicately balancing an adequate stream of sales while avoiding lower prices.
If most market drivers weren’t already pointing to lower urea prices, the Chinese are getting ever closer to returning to the urea export market. From 15 March, Chinese exporters will be able to apply for export licenses – this licensing process is slow, so the first export shipments will only start from mid-May. This is likely to accentuate the decline in global urea prices at that stage – we expect urea prices to bottom out during Q2.
As far as local pricing of urea goes, the biggest driver of price this week was the rebound of the Rand by almost 3% against the Dollar. Freight rates also reduced by $5-6/t on the Arab Gulf – Durban route, which added to the almost 5% dip in import parity costing of urea. Of course, there is very little activity for fertilizers into the summer rainfall area right now but the astute buyers will be starting to focus on purchasing opportunities that arise in the coming months as prices are likely to drop to their lowest values for 2024 in this timeframe.
Ammonium sulphate prices have resumed their slow decline as urea drives the Nitrogen price trend and high stocks in China drive aggressive sales. Lack of demand from all the usual big markets is adding to the downward pressure on amsul prices. Chinese granular amsul is now indicatively just above $200/t CFR Durban and crystalline product just below the $200/t mark.
Ammonium nitrate continues to struggle as demand in its traditional ‘home market’, Europe, remains low. Enquiries for CAN did pick up this week in Germany and sellers were quick to offer discounts in the hope of securing some decent sales volumes before the season ends in the next month or so. The CAN discount is also intended to attract buyers away from urea.
The ammonia market seems to have reached an equilibrium of sorts – prices have at least stopped falling. The Western Hemisphere (US and Europe) is seeing prices of around $450/t CFR and demand in this region looks reasonably strong. Prices in the Middle East and Far East are way below these values, with the Middle East barely above $300/t and Far East is close to $350/t. The change (increase) in phosphates subsidies in India is likely to generate some demand for ammonia imports there as DAP production increases in response to more favourable economics.
Phosphates
The USA leads Phosphate prices upwards as positive planting conditions stimulate demand
A shortage of prompt product and good spring planting conditions in the US led a stampede of buying which has driven American DAP hugely up in the past few weeks. Prices have jumped from around $575/st (short ton) to touch on $700/st this week – equivalent to around $770 per metric ton. This is $120-180/mt more than all the other major regions. The primary driver of this price spike is the demand for immediate/prompt product – the prices for April DAP remain around $600/st, which limits the interest of any international suppliers because of the shipping leadtime to the US. In reality, this is likely to be a short-lived phenomenon and phosphate prices remain under downward pressure across the globe.
Last week China announced its phosphates export quota for 2024 – with 5 million tons of DAP and 2 million tons of MAP earmarked. As with urea, the export approval process will open on 15 March and it will take 2-4 weeks for the first export cargoes to begin moving. This will immediately tilt the global supply-demand balance for phosphates into a clear oversupply situation – with prices likely to slide down due to this.
The Indian government intervened on its phosphate subsidy as the economics for imports were unviable, leaving the Indian market at risk of a massive shortage as the winter Kharif season starts from 1 April. The Indian government raised the nutrient based subsidy for both phosphates and potash for the Kharif season (1 April to 30 September). This subsidy adjustment should see Indian phosphate purchasing pick up strongly from April, assuming DAP prices remain at or below current levels.
The timing of the revised Indian subsidy and the return of Chinese exports coinciding should see traded volumes of phosphates pick up quite sharply from April – but this is expected to coincide with lower prices. The underlying demand for phosphates remains weak and there is generally an oversupply of product. Producers are likely to accept lower prices to mover their inventories and generate some cashflow, and they will be targeting the 2nd half of the year to try and lift prices and increase their profitability.
MAP prices remain broadly unchanged. Unlike DAP, MAP availability is more limited and producers and traders are doing their best to use this tightness to lift prices. The US situation with prices spiking is adding to the noise but poor crop economics in Brazil remains the biggest barrier to buying and prices in that region. The MAP price in the Middle East remains unchanged for the 16th week in a row. Our import parity calculation has reduced by 3.5% due to the improvement of the Rand versus Dollar and with the slight reduction in shipping costs.
Potash
The Potash price in Brazil has begun firming but the market is quiet everywhere else
Players in the Potash sector are pinning their hopes that the upward movement in the Brazilian price is an indication that prices are set to rise in other markets too. The price in Brazil rose by $10/t this week, lifting the CFR price above $300/t for the first time since mid-January.
Prices in other markets remained flat, in line with the lack of widespread trading activity and adequate availability of product in all markets. Improving planting conditions in Europe are giving sellers some optimism of an increase in sales volumes, although higher prices may not yet be a realistic possibility.
The Indian annual potash contract is expected to be settled in the coming few weeks as the new fertilizer year starts in India from April and the government announced an increase in the potash subsidy for the Kharif season (April to September), which should make potash imports more attractive. The contract price is speculated to land in the $280-290/t CFR India range – note that this is for standard grade product, which is usually $20-30/t lower than granular.
The Durban CFR price has been unchanged at $330/t for the last 6 weeks. We don’t expect any significant price shifts until the first buyers for next season come into the market. With the stronger Rand this week, we assess import parity costing at around R6,700/t ex-port.
General Market Outlook
Energy prices remain stable and local Crop values leap on drought concerns
Brent Crude oil prices have remained stable by recent standards, tracking the $83/bbl level. Medium term, global economic developments such as an interest rate cut in the USA and Chinese monetary interventions to assist its ailing economy are likely to drive oil prices. In Europe there has been a modest recovery in the TTF gas price, which bottomed out at $7/MMBtu and has climbed to $8.5/MMBtu. The US natural gas price has been pressured downwards due to high storage levels and increased production from various major LNG producers around the world. This has seen the US natural gas price remain well below $2/MMBtu, presently trading at $1.8/MMBtu.
Perhaps the most notable development on soft commodity markets this week was the huge rebound in local maize prices. White maize jumped more than 10% this week as growing concerns about the size and quality of this year’s crop amidst dry/drought conditions being experienced in most of the central area. With limited white maize available for import from South America, this has caused the local white maize price to separate from the export parity basis that it’s been trapped in for more than a year. White maize has broken above R5,000/t for the first time since December 2022. Yellow maize has also been has also been lifted by around 5%.
The oilseeds prices have risen substantially too, for the same reasons where the outlook for yields has been downgraded.
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