Nitrogen
India surprises the market by announcing next Urea tender, which is pulling prices higher
The rumours of an Indian Urea tender that have been circulating for weeks were proven true as the announcement was made this week. Despite Indian urea stocks at historical highs, they are apparently looking for up to 1 million tons of urea – no doubt based on their view that prices will only get higher as the year moves on.
The big issue now is where the urea supply for the tender will come from. Producers in South East Asia are well behind schedule as a number of plants are down for maintenance and breakdowns in some cases. The Egyptians continue to struggle with gas supply disruptions limiting production, thus they aren’t likely to too eager to offer sharp pricing to India. The Chinese are indicating that they are not particularly interest in participating in the tender. Which leaves the Middle East and Russian producers as the main contenders. The relatively limited participation is likely to result in less competitive (i.e. higher) pricing than the Indians might be hoping for. If India were then to abandon the tender or book much lower volumes than expected, this could cause the price to really collapse.
The general lack of demand around the world was evident as news of the Indian tender did not spark a whole lot of buying from any of the other big markets. Brazil and Argentina were absent from the market this week, indicating that they consider the recent rise in prices to be excessive and they are comfortable with volumes already purchased.
Similarly, Europe is not showing much interest, so the lack of urea availability from Egypt is not having much impact.
Despite some bullish suggestions from some Middle East producers that they wouldn’t accept prices below $360/t after the announcement of the Indian tender, prices are much lower than this with the highest price achieved this week being below $350/t. The Middle East prices was thus a few dollars on last week and is sitting at $340-350/t FOB.
Iranian producers have been aggressive in chasing business and clearly are not joining in the hype that urea prices are going to leap up in the short term – they reduced their price by $10/t to just over $300/t FOB Iran.
We are likely to see heightened volatility in urea markets over the coming weeks.
Much of the market is expecting that the Indian urea tender will boost nitrogen values and Ammonium sulphate prices are likely to rise. Brazil contradicted this view and prices there were weaker this week – pushed down by a general lack of buying interest and low crop prices. The other big reference prices out of China were unchanged this week. Amsul traders remain confident that higher prices are coming in the next few weeks.
Interestingly the lack of urea and amsul buying from Brazil was not repeated with Ammonium Nitrate and Brazil purchased Russian AN in large volumes this week. This raised the AN price from Russia by $15/t, pushing the price close to $250/t FOB Russia. CAN prices in Europe edged up a few dollars as retailers argued that nitrogen values have risen due to the recent surge in urea prices. Very few CAN deals were reported however as the season is now close to completion in Europe.
Ammonia prices in the Western Hemisphere showed some strength on the back of higher urea prices in the Americas, with ammonia gaining a few dollars this week. In Asia, the ammonia price trend was the opposite, with the Far East price declining by $25/t to below $400/t.
Phosphates
MAP prices make a huge leap up as Saudi makes sales to Brazil
Limited supply and thus limited availability of phosphates remains the overwhelming theme. The Indian DAP price rose another $10/t this week and now sits at $540/t CFR India. A number of large producers have stated that they have sold all of their July volumes and are pressing buyers to look to August if they want to secure volumes. Of course, these producers also have higher price ideas for these August volumes.
The news out of China is not particularly good as exports continue to be slower than many buyers would like, which isn’t helping the price. Chinese exports of phosphates are continuing, unlike Chinese urea exports.
This week saw the long-awaited correction in the Saudi MAP price as the Saudis made some large sales to the USA, Bangladesh and Brazil. It was the MAP transaction to Brazil that led to the Saudi benchmark price being raised by almost $70/t to more than $590/t FOB. The weaker Rand has further contributed to our import parity assessment for MAP leaping by almost 15% this week to over R12,200/t ex-Durban.
Foskor published its July MAP price this week at R11,433/t bulk ex-Richards Bay. Given the increase in the Saudi price, Foskor’s price looks like great value and Foskor may well be tempted to cancel this price and offer a higher number.
We repeat the same advice we’ve been giving for the past month or two – phosphate availability in South Africa is tight and is likely to remain tight as the season approaches. Growers would be wise to cover most if not all of their phosphate needs sooner rather than later.
Potash
Most regional Potash markets were stable this week, with only the US seeing prices drop
The United States is busy with its traditional ‘summer fill’ programme, where products like phosphates and potash moves from producers to wholesalers and distributors to start replenishing stocks at key distribution points in anticipation of next spring’s demand. Because of the cold winter and river systems being frozen closed, this supply process typically starts in summer and is underway now. There was therefore a considerable amount of potash sold this week in the US that did not relate to current demand for potash on farm but was more about rebuilding stocks in the wider supply ‘pipeline’ – this trading activity saw American potash prices fall $10-15/t. This puts the US price at New Orleans at about $300/t on barge, which is lower than the current Brazil price – suggesting that Brazil may soon be trying to push potash prices lower again.
Activity was slow in most of the other major potash regions and there were no significant price movements. Brazil already has large volumes of potash committed for import, which is busy moving into its domestic market as the summer rainfall season approaches.
Prices and demand across Asia remain on the weaker/lower side – the Indian annual potash contract price still hasn’t been settled and most other Asian markets are waiting on this before buying more product.
General Market Outlook
Crude Oil prices up as Middle East tension rises once more
Signs of Middle Eastern oil producers struggling to keep up with oil supply lifted Brent Crude prices as oil prices around the world were higher. Brent crude risen from $85/bbl a week ago to trade at $86.7/bbl currently. As tensions rise between Israel and Lebanon, concerns of increased conflict in the Middle East are also supporting higher oil prices.
European gas prices seem to have stabilized in the $10.5-11/MMBtu range for now. This is definitely a high number for EU fertilizer producers to operate and make a profit. Gas prices in the US have also been holding steady and are presently $2.7/MMBtu.
As the harvest in South Africa draws to a close, the latest crop estimates data was released yesterday. Of significance is the maize harvest which is 3million tons down on the 2023 harvest – 13.4 million tons versus 16.4 million tons last year. Most of this difference was seen in white maize production, which is almost 2.2 million tons lower year-on-year.
Sunflower production was around 70,000t (10%) down on the 720,000t produced in 2023. The biggest decline of all was seen in soya, where the 2024 harvest is 35% down at 1.8 million tons compared to the 2.8 million tons harvest last year.
International maize and wheat prices are around 5% down this week, on the back of US planting going well and growing conditions looking good. Soya prices were very slightly up this week on the back of news from Brazil showing that their soya production continues to suffer from adverse weather conditions.
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