Nitrogen
The Indian urea tender was the only real activity in the urea market this week. The lack of demand from other markets was telling as the tender raised over 2 million tons of offers.
Urea prices dipped in all the major markets and the dips were substantial at around 5% in most cases. The Indian tender was targeting 500,000-600,000 tons for shipment by 22 December. The speculation was that the tender price could fall below $600/t CFR India, compared to the October tender that was settled at $650/t CFR India. As it turned out, there was a lot of interest in the tender and the price was fixed at around $575/t CFR India. The Indians have now received acceptances for 1.4 million tons, which means a much bigger purchase than they originally intended. The volume being accepted by producers is also indicative of the lack of alternative sales options for the remainder of the year.
The impact of the Indian tender on the Middle East urea price was a reduction of almost $40/t, lowering the price to around $550/t FOB. Other markets saw cuts of $20-30/t. A number of occasional urea suppliers to India have secured volumes in this tender. For example, Egypt would normally be supplying Europe at this time of year and achieves higher netbacks because Egyptian fertilizer enjoys duty-free access into Europe, unlike most other origins. However European import demand has stalled as local production has restarted and inventory levels still remain high, leaving Egypt having to chase much less lucrative business such as the Indian tender.
Barring unforeseen market upsets, the short term outlook for urea prices is for further reductions until/unless demand picks up in the Northern Hemisphere markets.
The general weakness being seen across the nitrogen sector weighed on ammonium sulphate prices this week. Prices dropped around 5% and there is a widespread of lack of demand in all markets. Amsul producers are anticipating that prices will continue sliding into at least January.
Ammonium nitrate continues to see weaker pricing, especially in Europe as local production raises supply and prices still remain too high for buyers to purchase large volumes. With parcels of Russian AN floating around various European countries, there is a lot of pressure for prices to fall. We are seeing a bit of a waiting game where buyers are holding out for lower prices, while producers know that the big wholesalers and distributors can only delay so long before they need to rebuild their inventories ahead of the Northern Hemisphere spring.
The ammonia market is tracking the broader nitrogen sector, with prices under downward pressure in all regions. The Middle East ammonia price dropped $75/t this week, falling into the high $800s for the first time since February this year. Prices in the US Gulf are expected to see large declines too, with the Tampa contract price set to fall as much as $150/t.
Phosphates
Phosphates prices keep falling in North America and Europe as these regions move closer to price levels in the rest of the world.
The USA and European phosphates market continues to suffer from a lack of demand, as buyers reject current price levels and push for prices more in line with Asia and South America. The European DAP price is still around $250/t higher than the Brazilian MAP price, so it appears that the European price still has some way to go down.
After a few stable weeks, the Brazilian MAP price fell slightly this week, but buying activity for phosphates in South America is reported to be picking up now as the planting season is in full swing. Phosphate inventories in the region remain very high, so there is no immediate prospect of Brazilian prices spiking upwards.
The commentary from last week still applies – the Saudis and Mosaic in the US have some production constraints and the Chinese moratorium on phosphate exports is ongoing, which is somewhat limiting new supply. However inventories in most markets remain healthy and with demand continuing to be weak, prices are expect to drift sideways and gradually trend downwards.
The Middle East MAP price was unchanged this week and the Rand closed at the identical rate as last week Thursday, so the local import parity value was almost unchanged. The freight rate from the Arab Gulf to Durban was quoted as a dollar per ton cheaper, so that was the only move in the local cost base.
Potash
More regional adjustments in Potash prices this week as regional markets attempt to achieve equivalent prices to the Brazilian market
The Brazilian price saw a modest $5/t cut this week, while prices in South East Asia and China saw much bigger falls. South East Asia is still paying around $100/t more than the Brazilians, despite their $45/t reduction on standard grade product and $100/t on granular. The big consumer of potash in SE Asia is the palm oil sector and with crude palm oil prices taking a big hit in recent months, SE Asian buyers are pressuring potash suppliers for relief on their input costs.
Market commentators are suggesting that the slide in Brazilian potash prices is starting to slow. It is not obvious why Brazilian prices would stabilize at the current level in the mid-$500s and not continue to decline. Even if the price does stabilize at this level, other regional prices, which are all currently much higher than Brazil, will continue to trend downwards until they are in line with the Brazilian price. The outlook for potash prices is thus for ongoing reductions for the next 3-6 months. The same applies to the South African price, which is now a good $200/t above Brazil.
General Market Outlook
Brent crude oil heads downwards on the back of concerns about Covid cases in China hurting demand. The Rand holds steady against the Dollar at R17.3.
The Druzhba pipeline that carries Russian crude through Hungary towards Europe was reopened. Confirmation that the missile strike in Poland was an errant Ukrainian air defence missile and not a Russian weapon also eased political tensions, that in turned caused oil prices to fall. The Brent price started the week at $96/bbl and is now trading below $90/bbl and looks set to fall further as oil futures traders unwind positions. The European TTF gas price spiked up to $37/MMBtu as tensions rose following the afore-mentioned missile strike in a NATO country but subsequently reverted back down to $35/MMBtu currently. US natural gas prices continue to hover just above $6/MMBtu as the onset of cold winter weather counter-balances declining oil prices.
On the commodity crop prices, we saw the effect of the recent rand strengthening start to come through on local Safex prices. Maize, sunflower and wheat prices all lost around 2% week on week, while soya took a 6% hit. The international prices for the cereals were slightly up this week as geopolitical tensions around the Ukraine conflict continue to impact the market.
Latest Direct Hedge quotes for urea and MAP swaps in USD:
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