Price trends

Price trends

NITROGEN

The ammonia market started the year on a bullish note, with sharp gains seen in the Middle East and Baltic.

Bad weather impacted ammonia logistics in North Africa and east Asia in late December and early January, adding further pressure and costs to suppliers trying to meet agreed dates with contract partners. The continued rise in European gas costs has resulted in the curtailment of production in the Netherlands and is likely to create additional demand in the first quarter of 2021. Recent market drivers include Middle East price jumps, fresh European demand emerging and further rises in Baltic prices.

Supply tightness is expected to be the main driver of sentiment in 1Q with winter demand and higher feedstocks and logistics costs adding to the bullish price environment. We expect the market to see further price firming in January, with fob prices forecast to rise by $12/t for Pivdenny and $21/t for Middle East. The market will remain generally supply-driven and susceptible to production cutback in certain regions, depending on market conditions and feedstock costs.

The urea market started the year where it left off the last, in bullish mood with attention now focused on markets west of Suez. US Barge prices jumped over $20/st since Christmas, supported by a grain price rally, as it moves to attract spot imports for spring. Last minute seasonal buying in Brazil has seen granular prices climb over $290/t c.fr in early January. Suppliers have benefited from the firm sentiment, with Egypt selling forward for European markets in the $290s/t f.o.b. and other sellers adjusting their price targets higher.

In the east, supply cuts rather than demand have generated rising prices. Indonesia has sold in the range $275.50-278/t f.o.b., a sharp jump on last business, benefitting from the lack of Chinese exports and reduced Malaysian supply. Recent market drivers include grain prices raising US spring hopes, Europe and Turkey facing a price jump and China remaining absent from exports.

Current firm demand west of Suez should bridge into Australian and Thailand buying later in the first quarter. Buying is ramping up for both Europe and US. European buying was low in autumn and buyers are now playing catch up. US prices surged in late December and Nola is now an attractive market for spot urea. An Indian tender, whenever it is called, will add further support. Indian urea sales have fallen below expectations since August and the country is unlikely to tender again before late March/April. Reduced Chinese production and exports along with production issues in some countries have mitigated this loss of demand.

Table 1: Price indications

END OF MONTH SPOT PRICES

natural gas

ammonia

urea

diammonium phosphate