Fertilizer International 507 Mar-Apr 2022
31 March 2022
Market Insight
Market Insight
PRICE TRENDS
Urea: Nitrogen prices spiralled rapidly upwards in early March, as Western sanctions on Russia severely curtailed the supply available to most buyers. European and Latin America importers stepped into the market en masse at the beginning of March looking for urea. Traders also competed for tonnages from producers. In response, f.o.b. and cfr prices escalated in tandem.
The Egyptian granular urea price was a particular standout. In a flurry of trades in early March, it added another $145/t to finish at $905/t f.o.b. Asian markets were quieter – as Russian supply is less significant – but still saw double-digit price increases in many locations.
Key market drivers: Russian cargoes are hard to find and expensive. Financing trade in Russian fertilizers is also proving challenging. Many buyers in Europe and the Americas will not buy Russian fertilizer. EU natural gas prices have also soared to record highs. This is likely to drive nitrate prices up and/or prompt EU producers to shut down.
Ammonia: The loss of 200,000 tonnes per month of Black Sea supply has exposed the ammonia market to even further volatility. In Ukraine, Pivdenny suppliers are unable to cover shipments, while Russian producer ToAz, which exports through Yuzhny, declared force majeure on contracts. This is likely to leave several key buying regions short of ammonia in April.
Moroccan, Turkish, Tunisian and Indian buyers all face shortage risks. Some are looking to Middle East producers to fill the gap, with f.o.b. prices in the region likely to spike higher once negotiations have been finalised. Soaring gas prices are yet another factor. These are making it difficult for traders to firm up a position, with the European cost of production fluctuating from below $1,000/t at the end of February to over $1,700/t on 2nd March.
Key market drivers: Baltic contract rising $40/t with Yara settling with Russian producers EuroChem and Uralchem at $1,155/t f.o.b. for March shipments. Natural gas prices soared with the outbreak of the Russia-Ukraine conflict, settling at a new high of around $57/mn Btu on 2nd March. Yara and Mosaic failed to reach an agreement for contract shipments to Tampa in March, with both sides remaining too far apart on price.
Phosphates: DAP and MAP prices in several western markets surged in early March. In Brazil, importers returned to the market, with Moroccan MAP trading at $1,010-1,015/t cfr. Indications at the start of the month were lower, ranging $950-1,000/t cfr. The price had been at $900-925/t cfr at the end of February. In northwest Europe, a small lot of Russian DAP traded at $1,000/t fca, with offers reaching $1,030/t fca. Previously, European DAP trading had been lacklustre, with prices at Ghent in the $930-940/t fca range. In the US, DAP barges hit $850900/st f.o.b. Nola, up by over $100/st.
Key market drivers: Soaring commodity prices – with crude oil, natural gas and grains all surging in early March following the outbreak of the Russia-Ukraine conflict. Freight costs also jumped, putting further pressure on global supply chains. Governments sanctioning the Russian economy – at least one major European distributor has distanced itself from future Russian fertilizer purchases. The closure of Ukraine’s Pivdenny port has prompted concerns for the supply of ammonia to some north African phosphates producers.
Potash: Asia, Brazil and northwest Europe MOP prices all rose in early March. This reflected buyer concerns about the potential supply shortages that could emerge if Russian producers were unable to deliver potash to importers because of the Russia-Ukraine conflict. Despite the seasonal lull, enquiries shot up at the beginning of March, and producers are in the process of offering new prices in different markets.
Key market drivers: The EU ban on Belarus potash – further economic sanctions against Belarus now ban all potassium chloride products. Fallout from the Russia-Ukraine conflict – potash distributor Uralkali Trading and producer EuroChem were able to sell as normal, as of the beginning of March. But Russian potash customers may already be looking for alternative sources.
NPKs: Key buyers in west and central Europe stepped into the market for NPKs at the beginning of March amid fears of a supply shortage for the upcoming spring application season and rising prices. Buyers in Germany and Central Europe readily accepted prices which they deemed to be too high in late February. Prices have been rising throughout early March. Offers for 15-15-15 in Germany now stand at e680/t fca Hamburg.
Outside Europe, the market is still largely in wait-and-see mode following the start of the Russia-Ukraine conflict, and the ever-expanding list of western sanctions.
Key market drivers: The likelihood of more sanctions on Russia – western nations are under pressure to impose further sanctions on Russia, while a growing list of companies are refusing to conduct business with Russian producers. Shipping companies suspending cargoes moving out of Russia – future fixtures for loading Russian NPKs are difficult to conclude as many shipping companies, including Msc and Maersk, are refusing to move Russian product.
Sulphur: Global market prices have climbed rapidly following the outbreak of the Russia-Ukraine conflict. The market remains in wait-and-see mode due to the fluid situation around tightening sanctions.
F.o.b. pricing has seen substantial lift, due to supply concerns, while cfr offers also continue to climb. Rapid bunker price increases have lifted freight costs globally, a factor which has also raised cfr offers. The gap between current offer levels and previously concluded business has become sizeable. Offer levels at the beginning of March were broadly quoted at $400-420/t cfr China and India, versus the Qatar March price of $333/t f.o.b. which equates to mid-$390s/t cfr south China or higher.
Key market drivers: Sanctions against Russia have created uncertainty on fertilizer and sulphur export availability from the region. The Russia-Ukraine conflict has also cut off significant ammonia and wheat export availability.
OUTLOOK
Urea: The outlook is understandably volatile. Trade flows will eventually adjust across products, as market participants adapt to the new difficulties in trading Russian fertilizer. But that is still likely to take a considerable time and, in the interim, supply is tight.
Ammonia: The market is braced for higher pricing. An increase in east to west shipments or demand destruction could bring some relief to the supply balance.
Phosphates: The outlook is volatile. Phosphate prices are set to continue rising, pressured by both raw material costs and tight availability. EU markets are likely be hit hardest by the constricted supply, if buyers avoid Russian manufactured products.
Potash: Higher potash prices around the world are expected. Producers will increase offers while Russian supply remains a concern for market participants. Ever tighter supply will mean buyers are forced to pay more. However, demand destruction created by inflated prices is already starting to occur, suggesting that price ceilings may emerge over the coming weeks.
NPKs: While there is still much uncertainty, NPK prices are almost certain to rise on the back of surging feedstock costs. Fears of a supply shortage in the west will also support higher pricing. In the east, meanwhile, prices are coming under pressure, as buyers are reluctant to pay at current levels and consequently demand destruction is taking place.
Sulphur: Pricing is set to firm in the coming weeks. The logistical bottlenecks caused by sanctions are expected to maintain a tight market globally. Redirected trade flows may also result, potentially leading to price discrepancies between regions.
