Fertilizer International 496 May-Jun 2020
31 May 2020
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Prices peaked in early March at $260265/t f.o.b. (Egypt and Middle East) and have declined since, falling by about $30/t by the end of April. Despite strong demand for urea for April shipment, particularly from India, Australia, Europe and the US, this was outweighed by uncertainty created by the Covid-19 pandemic. Nitrogen fertilizer prices have, however, held up better than other energy-related commodities, partly because the pandemic coincided with the peak demand period in the northern hemisphere.
India bought nearly 750,000 tonnes of urea for April shipment. Timely rain also prompted Australia to purchase 5-6 spot cargoes of granular urea from the Middle East, Southeast Asia and China. In the US, meanwhile, prices have remained at a premium to other markets in April, pulling in more volumes. Globally, the market is waiting for demand to emerge from other countries for May. It is also focussed on likely export prices and volumes from China, especially as lower gas and coal prices mean Chinese suppliers are more competitive than last year.
Phosphates: The market was increasingly affected by the global Covid-19 pandemic in March and April, as enforced lockdowns hit production capacity, especially in Jordan and India. Several Indian phosphates producers shut their plants in March, and import demand from Indian buyers has picked up significantly as a consequence. Imports linedup by India for the second-quarter include 1.19 million tonnes of DAP, although this still lags the 1.95 million tonnes scheduled for the same quarter last year.
Chinese producers re-emerged in April, after several months affected by coronavirus lockdowns and strong domestic demand, with production capacity becoming available for export, following the end of the Chinese domestic season. Indian DAP prices varied from $308/t cfr in early March to $315/t cfr at the end of April.Chinese DAP prices remained almost stable at $303-$306/t f.o.b. over this period.
West of Suez, demand in Brazil and Argentina was muted after significant purchases earlier in 2020. Brazilian MAP prices softened from $328/t cfr in early March to $308/t cfr in late April. US barge prices (Nola DAP) firmed from $278/st f.o.b. at the beginning of March to $280/ st f.o.b. at the end of April.
Potash: Prices continued to fall in March and April. The weakening economic outlook, the spread of Covid-19 and a lacklustre import schedule for January and February all took their toll on demand.
Potash suppliers made some production cuts last year in response to oversupply. But demand has dropped further since then. Import/export data for Jan-Feb show MOP imports have dipped by 27 percent year-on-year, allowing stocks to draw down as seasonal demand ramps-up. This is true of Brazil, the US, Europe and Southeast Asia, all of which are still oversupplied, albeit much less so in recent weeks.
Sulphur: Following a flat January and February, prices across the globe started to increase at the beginning of March, as buyers looked towards April loading cargoes. China also stepped back into the market for cargoes, needing to play catch-up after its lockdown and responding to spring application season demand. Prices eventually reached five-month highs due to a combination of: three months of tight supply east of Suez, buyers looking to cover second-quarter demand, and China’s return. Pockets of supply-side tightness west of Suez, due to refiners lowering their run rates in response to coronavirus measures, also contributed. Market sentiment did eventually turn bearish, however, as lockdown measures took hold globally, causing prices to soften in late March.
MARKET OUTLOOK
Urea: Continuing price falls look likely given the falling demand from the industrial sector, a consequence of reduced economic activity and lower feedstock costs. Natural gas and LNG prices are very low, while corn prices have suffered due to the reduced demand for ethanol. CME futures for new crop corn, for example, fell from $3.70/bushel in early March to $3.10/bushel currently. The scene is set for urea prices to remain under pressure in May and June.
Phosphates: Further demand from India and Pakistan is expected in coming months. Chinese suppliers are looking for an outlet now that their domestic season has come to an end – but will be facing Indian market competition from Moroccan, Saudi Arabian and Russian suppliers. East Africa and Latin America could still provide outlets for Chinese product. Buyers in Latin America are, however, in no hurry to purchase ahead of the safra application season in the third-quarter.
Potash: The market could be at a turning point with prices levelling-off soon. Producers will still need to react quickly to further falls in demand, though, against the backdrop of economic recession and myriad other Covid-19 impacts. These are collectively adding a significant downside to the price outlook. But if national governments’ prioritise food security during the pandemic, as is the case in Europe currently, then demand could remain relatively unaffected.
Sulphur: Tight supply is set to continue in those regions where sulphur production is reliant on oil refining as – with large swathes of the world still under lockdown – the demand for mainstay oil products such as jet fuel and petrol remains low. Prices are nevertheless still expected to soften globally, despite the drop in sulphur supply across many markets west of Suez, as large end-user consumers in metals, mining and chemicals markets have reduced operational rates dramatically, if not having already closed completely.
