Fertilizer International 497 Jul-Aug 2020
31 July 2020
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Prices bottomed out in mid-May following an Indian tender purchase of more than 600,000 tonnes of urea. This was supplied from Ukraine, Egypt and the Middle East at $227-231/t cfr, as Chinese suppliers were unwilling to sell at this price level. These purchases tightened the market. After an initial stand-off, prices began to firm in early June, with traders needing to cover short sales made for shipment in June and the first half July.
The second week of June was particularly active. More than 500,000 tonnes of granular urea were traded and prices jumped by $20/t in some areas. Prices rose to $230-240/t f.o.b. in the Middle East and Egypt – a price recovery that has brought Chinese urea back into play. Demand from China’s summer season has waned and, with production remaining high, falling domestic prices have made Chinese urea competitive at current offers of around $230/t f.o.b.
Phosphates: Import demand from destinations east of Suez picked up throughout May and June. Indian buyers were the most prominent, receiving 1.3 million tonnes of DAP imports in May and June and scheduling a further 986,000 tonnes for July and August arrival.
Global DAP prices stayed mostly flat in May and June but firmed slightly towards the end of the period. The Argus DAP index – a basket of prices for the five biggest export nations – rose by just 0.4 points to 87.3 between the end of April and mid-June.
MAP prices, in contrast, firmed more strongly, with Brazilian MAP prices rising by $12-13/t during May and June to $318/t cfr. Brazil’s MAP imports have hit record-highs this year. Crop fundamentals have been lucrative for importers, with barter rates reaching four-year lows. The September start of the key phosphate application season for the safra soybean crop in Brazil means that the window for fertilizer purchases is now starting to close.
Phosphate producers, in advance of the anticipated increase in Latin American demand, reduced output or allocated product elsewhere. Morocco’s OCP cut fertilizer granulation by 200,000 tonnes to 650,000 tonnes in June, and is considering carrying this over into July. It also sold significant amounts of DAP to India and Pakistan, lining up 415,000 tonnes for June and July arrival. Chinese phosphate producers also reduced their output, producing at 50-55 percent capacity in mid-June.
Potash: the market remains robust despite the coronavirus pandemic and the associated downbeat economic outlook. The market has held up well, despite Covid-19 impacts, assisted by government measures to maintain food security along the whole supply chain, as fertilizer and farming are widely considered essential. Lower prices have also made MOP increasingly affordable. Nevertheless, demand in Southeast and East Asia has been hit, with uncertain logistics, staff shortages and palm plantation shutdowns all taking their toll.
In the US, granular MOP barge prices stabilised in early June. Expectations of domestic summer-fill programmes later in the month continued to limit buyer interest at Nola ahead of a potential price reset.
In Southeast Asia, high stock levels reported by distributors in every country has resulted in yearly demand running at 75-85 percent of normal levels. Second-quarter prices continued to fall, albeit more slowly than in the first-quarter, to a midpoint of $250/t cfr, even after the announcement of Chinese contracts at $220/t cfr.
Prices have started to rise in Brazil. Granular MOP prices, which had reached mid-point lows of $215/t cfr in late April, rose to $228/t in the first week of June. All three of the country’s biggest potash suppliers have told the market they are fully committed in July. Sales for delivery in future months are also rising.
In Northwest Europe, prices continued to fall until mid-April, following the seasonally slow December-February period, as distributors were keen to draw down on their stocks.
Key contracts with China and India have been settled in recent months. At the end of April, a consortium of Chinese buyers agreed its first MOP contract since September 2018 with Belarusian potash marketer BPC. This was secured at a headline price of $220/t cfr, down $70/t on the previous level.
Sulphur: Covid-19 was unsurprisingly the talk of the market during May and June – with Opec+ production cuts coming a close second. The pandemic has forced oil refinery-based sulphur production downwards with many refiners west of Suez lowering operational rates, if not being shuttered completely. This, together with Opec+ cuts to oil production across key parts of the FSU and Middle East, has seen sulphur prices trade on a flat-to-firm basis in most markets.
Prices held relatively steady in key markets in May, with Middle East f.o.b. prices trading at a midpoint of $55/t. China’s top-end granular price held at $69-70/t cfr, while Brazil’s cfr price varied within the low-to-mid-$70s/t range. Stability was maintained because buyers and sellers alike had concluded business well in advance. But prices eventually started to firm as June commenced, with buyers looking to secure the few cargoes that were available. A pick-up in freight rates also played a large role, adding to the existing upwards price pressure from the tight supply balance.
The Mediterranean was the exception to this trend with prices trending flat-to-soft instead. Key regional supply and demand centres such as Italy and Turkey have been hit by the pandemic. Despite Covid-19 hitting both sides of the market, Mediterranean supply has outweighed demand, so pushing prices downwards.
OUTLOOK
Urea: Another Indian tender is taking place at the time of writing and Chinese urea is expected to figure prominently as a supplier to India from July onwards. The ability of Chinese suppliers to provide around 400,000-500,000 tonnes/ month for export in the second-half of the year is expected to cap prices in the short term.
In the West, most attention is focused on Brazil, where favourable corn:fertilizer price ratios boosted demand in May and June. Prices have recovered from a low point of $208-210/t cfr in May to around $245/t cfr at present. Competition for spot tonnages should continue to support prices through the third-quarter.
Phosphates: Brazilian MAP demand is set to remain strong throughout July, with more buying expected for August arrival. Purchases from Indian and Pakistani importers are likely to continue, driven by solid agricultural fundamentals, especially in India. A healthy July-September monsoon season is also forecast on the subcontinent. No downsides are anticipated for DAP and MAP prices in coming weeks, given the continued buying and OCP’s reduction in availability. Prices in markets west of Suez will, however, be placed under pressure once Brazilian demand for safra season applications ends.
Potash: Prices have flattened, as of early June, and should stay flat in the next few months. Solid demand in key MOP-buying markets, specifically Brazil, India and the US, should see prices head upwards during the third-quarter. But the sharp economic downturn and enduring Covid-19 effects could act to temper demand and limit any price gains.
Sulphur: Third-quarter prices are expected to repeat the pattern of the previous quarter. Increases are anticipated in the first few weeks but are likely to be flat-to-soft thereafter. Initially, a tight supply/demand balance and a flurry of purchases should buoy prices in July as end-users seek to cover the June deficit. But liquidity is likely to drop off subsequently with prices set to trend flat-to-soft later in the quarter, once market appetite is filled and contract negotiations are settled. n
