Fertilizer International 503 Jul-Aug 2021
31 July 2021
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Much of the urea market was on hold in late June as prices from the Indian RCF tender were awaited. Rumours that offer prices were all above $500/t cfr suggests the wait will have been worthwhile for suppliers. If confirmed, this would mark a new upward step in prices and reflect China and Middle East f.o.b levels above $470/t.
West of Suez, buyers are also expecting a new round of price hikes, despite the market having been inactive. This is due to another jump in freight rates from ports of origin in the Middle East, FSU and Mediterranean, as well as higher f.o.b. prices.
Key market drivers: availability for the RCF tender in India, government pressure to curtail exports in China and recent flat prices in Brazil.
Ammonia: Hopes of a slowdown in the price rally over next few weeks were confounded by a $50/t rise in the Tampa contract price for July shipments. Cargoes continue to be lined up from suppliers in the west for shipment to customers short of product in east Asia. Buyers remained out of the market towards the end of June while they weighed up their options and the prospect of the current tightness continuing into August.
In the absence of official information about how long exports will be affected by Ras al Khair’s shutdown in Saudi Arabia, traders are preparing for the Middle East region to be below capacity until August. This would leave Saudi buyers needing to buy more spot ammonia, a situation which is supporting delivered offers above last business done.
Key market drivers: the rise in the Tampa ammonia contract price to $585/t cfr, the continuing Middle East outage and Ukraine exports being under threat.
Phosphates: New sales to major end markets have continued despite liquidity slowing towards the end of June. Indian DAP prices jumped following a sale by Saudi Arabia’s Ma’aden at $590/t cfr. Indian importers remain constrained, however. Comparatively low domestic prices are setting the breakeven price for imported DAP at $560s/t cfr. Bangladesh increased the volume of its private sector DAP purchase tender by 100,000 tonnes to 850,000 tonnes. China is expected to supply all of these lots.
Brazilian MAP prices firmed to $753758/t cfr – up by around $8/t – on sales of Russian and Moroccan MAP. Barge prices in the US remained flat in the latter part of June.
Key market drivers: JPMC signing a supply agreement until 2022, China’s January-May DAP exports hitting new highs and another jump in raw material prices.
Potash: Granular MOP prices in Brazil and the US rose significantly in late June, while those for standard MOP edged up in southeast Asia. These increases occurred despite the market being partly on hold – Europe almost entirely so – as the outcome of EU deliberations over Belarus sanctions was awaited. Offers dried up as producers stepped back from the market on hopes of making gains from tight supply.
Key market drivers: the EU’s economic sanctions on Belarus, Nutrien’s further output increase and Salt Lake Potash preparing for August SOP exports.
NPKs: The prospect of EU sanctions on Belarus dominated NPK market discussions in late June. Most producers abstained from offering product as they awaited exact details of the sanctions. At present, the consensus is that their arrival will make potash shortages inevitable for a number of NPK manufacturers in the EU, and that potash prices in Europe will rise as a result. This, in turn, will push up NPK production costs and potentially tighten NPK supply.
The global NPK market remains firm with news of the sanctions adding to existing bullish sentiment. Prices have continued to rise following a fresh 15-15-15 sale by PhosAgro to Brazil at $485/t cfr, this netting in the low/mid$440s/t f.o.b. This agreed price is up by $25/t from the firm’s previous sale to Brazil in early June. Acron recently sold more than 10,000 tonnes of 16-16-16 to southeast Asia at $510-515/t cfr, up from $460-490/t cfr earlier in June.
Key market drivers: the continued rise in raw material prices and expectation of Brazilian demand remaining strong through August.
Sulphur: Quarterly supply contract negotiations are continuing with most parties still engaged in talks. Initial numbers quoted to traders were at $170/t f.o.b. for Middle East tonnages. At late June’s elevated freight rates, this would work out at around $217-219/t cfr south China and $222-225/t cfr river.
Some third-quarter contract tonnages for the Brazilian market were concluded in the range $221-235/t cfr. These are thought to have been sourced from the Middle East and the FSU.
Eastern markets have recently seen a slowdown in demand and easing of supply, while the west remains in tighter balance. Contracted exports from both Kazakhstan and Russia will be limited in the forthcoming quarter. This is expected to increase east to west trade flows, albeit at higher freight costs.
Key market drivers: reports of Middle East third-quarter price levels and emerging Brazilian third-quarter cfr numbers.
OUTLOOK
Urea: Supply tightness for July makes further price increases likely, especially east of Suez. A lull is expected in other parts of the market as prices catch up to the levels set in India and North Africa at the end of June. Price support is likely to be found again in late July when Indian tenders resume.
Ammonia: August should provide some opportunity for respite and lower pricing – if Saudi production starts to ramp-up again. While the outlook through to the end of August remains generally firm, there is scope for prices to stabilise as markets in the east and west become more balanced.
Phosphates: A variety of factors continue to fuel DAP price sentiment. These include fears of an export tax in China, rising Bangladesh purchase volumes and remaining Indian buying. West of Suez, buyers are hoping to see the upwards price momentum slow. But further price increases remain likely in coming weeks due to tight supply and producer discipline. The sizeable tonnages needed by Argentina and Brazil during the third-quarter are expected to support prices. The latest surge in crop prices could also drive up MAP prices further in Latin America.
Potash: The potash market remains firm. The combination of tight supply and patient suppliers has left buyers chasing MOP. Consequently, sellers are in a strong position to dictate prices in upcoming sales. Market conditions also likely to prompt a rise in SOP prices for third-quarter business.
Prices will continue to rise globally, though at different rates. There is some evidence that demand erosion is already taking place at current price levels. This could relieve some of the persistent supply tightness by causing sales levels to plateau.
NPKs: Suppliers will continue to raise NPK prices while there is no sign of the upwards trend in raw material prices relenting. Suppliers may find their options narrowing, however, as buyer resistance to rapidly increasing prices is growing. For now, several markets are accepting higher price levels due to concerns about future price hikes and potential product shortages.
Sulphur: Rising freight rates continue to be a complicating factor. This has resulted in the conclusion of lower-priced f.o.b.-based business on Middle East cargoes in recent weeks. Fundamentals do, however, remain largely supportive, despite this slight downward correction to f.o.b. pricing. This correction is expected to balance out the market by accounting for freight costs increases. The upshot is a soft-to-stable market at somewhat lower f.o.b. levels – while cfr levels will vary depending on freight costs.
