Fertilizer International 495 Mar-Apr 2020
31 March 2020
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Prices rose in February, driven upwards by high demand and coronavirus concerns. Heavy US buying and trader positioning saw producers sell out early for March. Reduced export availability from China – linked to the impact of coronavirus on production – also contributed substantially to the price hike. The US market pulled up prices almost single-handed. Nola prices rose by nearly $40/t to $270/t cfr with almost 500,000 tonnes of urea being bought.
Phosphates: Prices stabilised in many parts of the world during January and February, and even began to rise, as multiple production cutbacks finally began to take effect. The rise was led by Brazilian MAP prices. These climbed from $278/t cfr in late December to $325/t cfr in late February. This was accompanied by higher prices in the US barge market, with Nola DAP prices rising by $45/t to $281/t f.o.b. over the same period. Europe followed a similar trend. DAP prices there rose from $318/t fca Ghent in December to $345/t fca in February, as importers sought to cover demand ahead of the spring application season.
DAP price levels east of Suez, in contrast, remained flat for much of the first-quarter due to the general absence of demand. Chinese export prices rose marginally from $293/t to $298/t f.o.b. between end-December and the end of February. Supply and demand in China have both been constrained significantly by the coronavirus outbreak. A third of Chinese phosphate production is located in Hubei province, the outbreak’s epicentre. Indian DAP prices were similarly stable over the same period, rising by just $10/t to $308/t cfr.
Potash: In February, Argus cut its global potash (MOP) consumption projections for 2020 to 66.7 million tonnes. This one million tonne drop on the previous projection was linked to a variety of factors, including downgraded economic growth forecasts, weather conditions, and the impact of the coronavirus outbreak on buying.
Sulphur: Prices trended flat-to-firm across January and February, contrary to market expectations. A combination of factors have pushed cfr prices steadily upwards as those seeking prompt loading cargoes have been forced to pay up. Russian sulphur producer Gazprom had just 200,000 tonnes available for export in the first quarter. Supply limitations were compounded by maintenance works in Saudi Arabia and bottleneck issues affecting loading at the UAE’s Ruwais port.
In China, fallout from the evolving coronavirus outbreak has forced key consumers to remain offline or operate at severely reduced rates. As a result, sulphur inventories at Chinese ports have climbed to 3.1 million tonnes, their highest ever recorded level. Despite record high inventories, prices have continued to rise (both ex-works Yn/t basis and cfr basis) because of the lack of import and replenishment options.
MARKET OUTLOOK
Urea: The market looks set to remain firm in March with producers heavily committed and traders attempting to push up prices before selling long positions. Export supply out of China will remain very low through March and April, as the Chinese government has told producers to focus on domestic supply to mitigate the impact of the coronavirus outbreak. Argus believes, however, that price rises will still slow in March. Much of the expected increase in global prices has already taken place, in our view.
Phosphates: In the short term, prices look set to stay firm, both in Europe and west of Suez, given the constraints on supply and current levels of demand. Nevertheless, the picture could change when significant additional supply returns to the market towards the end of the first-quarter. Mosaic has announced that it will resume full phosphate production in March, for example, while Morocco’s OCP, Russia’s PhosAgro and Tunisia’s GCT will all ramp-up their output in March as well. DAP prices east of Suez look more stable. Indian buyers will continue to source DAP to replenish inventories, but supply from Jordan and Saudi Arabia has tightened. Chinese output, meanwhile, is poised to ramp-up, albeit with little import interest from Pakistan.
Potash: Demand in 2020 is still expected to increase by 1.9 million tonnes year-onyear, raising demand to levels last seen in 2018. This demand increase is, however, largely a knock-on effect of China not settling its contracts in 2019, with some contribution from US restocking. With potash stocks high globally, product already in the supply chain could be enough to meet this year’s demand requirements, without the need for extra production. Therefore, unless there are further production scale-backs, producers may be forced to temporarily close mines at the top of the cost curve until prices recover. Coronavirus impacts remain the wild card. These could easily negate the projected potash demand increase for 2020, although the overall impact of the crisis is still hard to gauge currently.
Sulphur: Prices are expected to continue on a flat-to-firm path for the rest of the first-quarter – as no improvements in spot availability are anticipated in the near term. Russian supply will return to the market in the second-quarter with the opening of the Volga Don river system for transportation. Supply restrictions due to maintenance will generally also come to an end, with the notable exception of the US. Despite improving availability, price softening is not likely to kick-in until end-April to early-May. This is because spot buyers who have struggled to find product for March loading will immediately snap-up any product offered by April loaders.
