Fertilizer International 506 Jan-Feb 2022
31 January 2022
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Widespread anticipation of a price correction appears to have forced it to become a reality. Consequently, prices crashed in many markets in mid-January. This crash was particularly marked in the US and Brazil. In general, buyers remained on the sidelines, prompting sellers to lower their prices to incite demand.
In Brazil, early January prices were in the low $700s/t cfr, down by $100/t in a week; bids and offers from buyers and sellers tracked downwards together – although trade itself was limited. US prices fell as low as $575/st f.o.b. Nola – equivalent to around $630/t cfr US Gulf – their lowest level since September 2021. Although Asian markets remained generally quiet, prices also fell in this region.
Key market drivers: many producers, from the Baltic through North Africa and the Middle East, are still holding uncommitted volumes for January loading; elevated natural gas prices; several offline nitrogen plants; severe Chinese exports restrictions.
Ammonia: While underlying sentiment remains very firm, with several regions short of product, mid-January trading was relatively calm. Indian buyers have been caught extremely short, however, and are in the market for any delivery date on offer. Middle East and southeast Asia cargoes – which could have met the Indian demand gap – are instead being diverted to Morocco and northwest Europe to take advantage of the huge premium in delivered pricing. Markets west of Suez are stable. Producers here are offering product above last done business. There is also an absence of spot availability from the Black Sea and Trinidad.
In Europe, the average cost of ammonia production in early January was estimated at $1,036/t, down by around $90/t on the week. Gas feedstock prices were trading in the range $22-29/mn Btu before settling around $28.3/mn Btu on the 13th January.
Key market drivers: supply shortages, particularly to Europe, Morocco and India, although some availability is reported in Turkey, Egypt and the Baltic; European energy prices.
Phosphates: India is the only market showing significant activity with buyers concluding sales from Russia, Morocco, Australia, China and Jordan. Another 350,000 tonnes of DAP purchases were confirmed mid-January – on top of 250,000 tonnes bought earlier that month. Further sales are still likely, given that a further 500,000 tonne first-quarter requirement is predicted. Domestic stock levels (around 1.3 million tonnes) are also still low historically. Chinese authorities are continuing to clear more product for export, although approvals are proceeding slowly.
Key market drivers: the slump in Chinese DAP output, with run rates in Hubei province reportedly at below 50 percent due to low domestic demand; the first-quarter phosphoric acid price and the anticipated settlement between OCP and its Indian contract partners; downward revisions to the Brazil crop forecast due to adverse weather.
Potash: The market was still seasonally quiet in mid-January, with producers reflecting on the wider impacts of sanctions on Belarusian potash supply. While contracts between producers and India are imminent, there are currently no signs of any negotiations with the Chinese buying consortium.
Key market drivers: Yara – which typically sources 10-15 percent of Belaruskali’s total annual potash output – winding down its sourcing from Belarus by 1st April due to sanctions on Belaruskali and BPC; Lithuania ending its railway transport agreement with Belaruskali, potentially signalling a complete cessation of potash exports through the port of Klaipeda from 1st February.
NPKs: NPK buyers are closely watching price movements in raw material markets. While potash and phosphates prices are stable-to-firm, urea prices, in contrast, are slipping with an expectation of a sharp downwards correction on the horizon. This softening has yet to translate to downwards price pressures. Instead, supply remains tight, particularly in Europe where offer prices are continuing to rise. Russian 15-15-15 offers for Europe, for example, are $635/t f.o.b. Baltic and above. In Africa, meanwhile, Kenya’s KTDA has closed the pre-qualification stage of its annual tender for 87,000 tonnes of 26-55, with the usual suppliers all participating.
Key market drivers: low stocks prompting more Indian demand – RCF has issued the first Indian NPK/NPS buying tender of the year for 100,000 tonnes of 20-200+13S and 10-26-26; Belarusian fertilizers being unable to transit through the port of Klaipeda; Yara ceasing to source potash from Belaruskali by 1st April.
Sulphur: New sales to Indonesia, South Africa and Brazil concluded at firmer prices in mid-January. Suppliers have increasingly opted to sell product on a spot basis and have lowered their contract allocations this quarter. This stance is due to reduced export availability in some cases. It also offers the chance to benefit from current firm spot pricing. A recent spot sales tender from Qatar (35,000 tonnes for February lifting) is expected to attract a good level of interest. Kazakh sulphur export losses, due to the recent violent clashes between protesters and the military, are expected to be around seven days of production at a minimum.
Key market drivers: firmer cfr based sales, Kazakh supply resuming, and Turkmen product being sold on ex-works basis at a higher level.
OUTLOOK
Urea: Prices are likely to continue adjusting downwards in the near term. India is now out of the market until March or April, while Brazilian buying has slowed, and the US market remains volatile. Although there are plenty of offers in Europe, the hope of lower prices is causing buyers to wait. Gas prices in the region should, however, provide support while temperatures are low.
Ammonia: The market at the start of 2022 looks very different to 12 months ago. Early January Pivdenny prices, for example, are $875 higher (midpoint basis) than at the start of 2021. Import appetite in Europe, the US, Morocco, Latin America and India is keeping the market in deficit, with supply options remaining limited. The sale of an Indonesian cargo to a European customer earlier in January highlights just how tight the market is.
Phosphates: Demand is largely located in India. There is an expectation that prices will start softening in February-March, after the lunar new year, although this is dependent on the export clearances situation in China.
Potash: MOP prices have hit an affordability ceiling in Brazil, Europe and southeast Asia. SOP and NOP prices, in contrast, still have some upside in those regions where feedstock MOP prices are continuing to rise. Belarusian supply difficulties, including Yara’s announcement that it will cease sourcing from the country and Lithuania’s move to stop exporting Belarusian product through Klaipeda, are providing some upside to prices.
NPKs: More price clarity is required on the impact of diverging price directions in raw material markets. Yet NPK prices are likely to be flat-to-firm while demand continues to outweigh supply.
Sulphur: Firmer conclusions continue to be made week-on-week in the spot market, as the first-quarter continues to see constrained supply and robust demand. Metals buyers are seeing healthy margins, and the phosphate market also remains firm despite some slowing to liquidity. While contract supply concluded to date has been at the low end of product pricing, we expect the first-quarter of 2022 to see firmer pricing.
