Nitrogen
Urea prices continue to firm as strong sales tighten the market
This week saw urea prices continue strengthening as the market clearly has some upward momentum. The latest Indian tender has caused buyers that were waiting on the sidelines to take action and dive into the market – which has predictably led to a lot of sales being concluded and product availability for October is getting very limited.
Those benchmark locations that saw downward movements a week ago are now all adjusting upwards rapidly as prices are higher across the globe this week. Middle East prices have now moved up to $350/t and Middle Eastern producers are probably best positioned to benefit from the surge in urea demand as they have the Indian tender option, plus lots of demand from the big Southern Hemisphere markets.
Some plant outages in South East Asia are tightening that market, especially while the Chinese remain out of exports.
The big North African exporters were fairly quiet this week but their prices had all led the market up, thus other benchmarks are busy catching up with them.
Brazil saw a solid $10/t increase this week as traders are reacting quickly to prices to ensure that they have adequate urea cover for Brazilian demand, as it is peak season there and any opportunities missed now may be difficult to catch up. Prices in other South American countries are even higher, and there are signs of buyer resistance at levels of $380/t CFR – it’s too early to tell whether this will slow the price rise or those buyers are going to be forced to pay up.
Ethiopia closed its latest urea tender for 250,000t to supplied in the next month – they have targeted a price equivalent to $352/t FOB Middle East which is in line with the current market level. But with prices set to keep running up, it may be tough for the Ethiopians to lock in so much product at that price.
The latest Indian tender that has surprised the market is closing on 3 October, so prices won’t be known until late next week. Indications are that prices will be at least $30/t higher than the last tender price of $340/t CFR India. The Indians may also struggle to attract large volumes given the apparent price trajectory – especially if they counter aggressively as is usually the case in these tenders.
Ammonium sulphate prices have surprised the market by not moving much, despite urea lifting nitrogen values. Amsul sales have been strong and the supply-demand balance is tightening, suggesting that price increases are probable in the near term.
Ammonium Nitrate prices likewise continue to be be stable but this is more a (lack of) demand issue. Despite urea prices increasing, nitrates values in terms of nitrogen content remain at a large premium over urea. With seasonal demand for nitrates being low, prices will struggle to get much support.
Ammonia prices were mostly flat this week but the mood in the market indicates higher prices to come. The next Tampa contract price is due soon and expectations are that it will be increased from the current $530/t CFR level, which will send a strong signal to the other benchmark locations. The main Asian benchmarks remain in the low $400s and should move up strongly in the coming weeks.
Phosphates
Phosphates edged up moderately this week
Indian buying is keeping the phosphates market ticking over – the price of DAP was a few dollars up. The phosphates price is being maintained by a shortage of supply, which continues to defy fundamentals given the amount of surplus capacity around the world. Demand in most regions is weakening as buyers find the price of DAP and MAP unpalatable.
There have been a number of large phosphate tenders held by the likes of Ethiopia and Bangladesh which have been scrapped because of lack of competitive offers. The handful of interested parties either don’t have the volumes at market prices or have very high price expectations. These countries may choose to re-tender but the probability is that they are not going to secure their desired volumes in time, meaning that there will be a shortfall in phosphate supply.
MAP prices are mostly being determined by Brazil, where the benchmark price has been unchanged for more than 2 months. There is increasing talk of details being done $5 or 10/t below this price but nothing has been confirmed. Brazilian consumption has been solid but the price is definitely limiting some of the potential sales.
Potash
Potash sector was quiet again this week
All the major potash benchmarks were unchanged this week. All the big markets are seeing volumes moving in normal volumes but demand remains on the weak side, despite prices being so low.
US major, Mosaic, announced a force majeure at one of its American potash mines that will see 200-300,000t of production being lost. These volumes aren’t enough to impact the price when the market is so weak. There is a hurricane threatening the US South which has raised concerns about fertilizer production and distribution in the affected states but no meaningful impact on fertilizer is expected at this stage.
There is growing talk from Brazil of the potash price dropping by $5 or even $10/t. This primarily because Brazil is one of the few regions active in potash trade right now and producers are anxious to at least maintain volume turnover, even if it means lowering the price.
General Market Outlook
Oil prices plummet as Saudi announces plans to raise volumes.
Brent Crude oil continues to reflect pessimistic economic outlooks in the major world economies - Brent did hit a midweek high of around $75/bbl but is set to close the week at-$71/bbl. Saudi Arabia announcing its plans to claw back market share (i.e. chase volume) has sent a strong signal that it will sacrifice price for volumes and this has dropped oil prices as a consequence.
Natural gas prices have moved upwards in both Europe and North America. The European TTF index has risen quite sharply to $12.2/MMBtu this week. Hurricane fears in the US have pushed the gas price up by 10-15% to $2.7/MMBtu.
Grains had another really positive showing this week, both at home and internationally. The major grains all showed around a 2% rise on international markets – the Rand performed well against the Dollar and is starting the challenge the R17 threshold, which constrained Safex prices to some extent. Oilseeds performed best locally, gaining around 3% on the week, while maize was only slightly up but in the black nonetheless.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
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