Fertilizer International 508 May-Jun 2022
31 May 2022
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Prices dropped sharply in most markets at the end of April in the wake of the Indian purchase tender. The lowest bids on the east coast and west coast of India were $717/t cfr and $750/t cfr, respectively. Price levels in southeast Asia fell by around $100/t along with similar market falls in the Americas.
Trade overall lacks liquidity with small lots changing hands at sporadic intervals. But the pockets of demand that have emerged are likely to increase in coming weeks now that a price reset has happened.
Key market drivers: In a slow-paced global market, India’s tenders are offering the opportunity to place significant tonnages. Despite curtailed demand, European supply remains fragile and geopolitical tensions surrounding the Russia crisis are continuing.
Ammonia: Supply and demand have started to rebalance two months after the removal of Black Sea ammonia exports from the market. Spot prices made steep losses west of Suez in late April following the $200/t drop in the Tampa May contract price. In the east, prices are stable with firmer contract prices. Some downside pressures remain, with the latest Indonesian sales tender, for example, attracting bids below last done spot business.
Key market drivers: Yara settling the Tampa contract price for May with Mosaic at $1,425/t cfr, a $200/t drop from April. OCP bought a 25,000-tonne ammonia cargo at $1,125/t cfr, most likely from Trinidad, for early-June delivery. Import demand from Turkey could pick up following news that producers there will be permitted to export CAN in May. India’s confirmation of fertilizer subsidies is expected to bring fresh inquiries from the country’s buyers.
Phosphates: India’s government has raised the DAP subsidy for the 2022/23 by 52 percent. But subsidy levels are still set to pressure DAP importers, as break-evens remain slightly below recently traded levels ($920s/t cfr) and significantly below f.o.b. levels in major origin markets. Chinese DAP prices eroded slightly to $1,050/t f.o.b. at the end of April. Availability of Chinese DAP seems to have improved, but export restrictions remain in place with approvals still taking several weeks to obtain.
Brazilian MAP prices declined amid a lack of demand. Levels have fallen to $1,200-1,240/t cfr, down from $1,2501,270/t cfr in late April. A change in crop fundamentals should lower barter rates and bring buyers back to the market in coming weeks.
Key market drivers: The rise in India’s DAP subsidy for 2022/23 to INR 50,013/t, up from INR 33,000/t. Maximum retail prices, meanwhile, remained flat and at INR 27,000/t are squeezing importer margins. Soybean futures (CBOT) reached record-highs of ¢1,748/bu in late April and remain at similar levels.
Potash: Although MOP prices have flattened off in a quiet period for the market, buyers will soon be seeking second-half requirements. Most producers see no end to rising prices and are targeting monthly increases. SOP prices continue to rise in Europe, as Mannheim producers pass on their higher feedstock costs to customers.
Key market drivers: The 150 percent jump in India’s MOP subsidy to INR 15,186/t ($198/t) for April-September, up from INR 6,070/t previously. Pupuk Indonesia is requesting 8-10 vessels of 25,000 tonnes each in an MOP tender announced in late April. Most producers (except BPC) are likely to participate. Offers are expected to start at over $1,000/t cfr for standard MOP.
NPKs: The Indian government has more than doubled the subsidy rates for all NPK/NPS products. The rates will apply for the first six months of the 2022/23 fertilizer year (April-September). This should help to bring importers of 10-26-26 back into profit and spur demand for the upcoming kharif season. Low stocks should also drive Indian demand. s. Indeed, India has entered the new fertilizer year with NPK/ NPS stocks of around 1.6 million tonnes, about 2 million tonnes lower year-on-year. The country remains a key outlet for Russian NPK producers.
In Europe, meanwhile, demand has slowed with the end of the spring campaign. Buyers – particularly in central and eastern Europe – have nevertheless started making enquiries for the high-P and K grades, particularly 10-26-26, which are applied in the autumn. These are typically sourced from Russia and buyers are therefore planning ahead in anticipation that Russian product is likely to be absent from the market this autumn.
Key market drivers: Having upped its April-May export quotas, Russia will keep export quotas for certain fertilizers in place until the end of August, with the option to review these. Poland’s Grupa Azoty will continue operating as planned, despite Gazprom’s decision to halts gas deliveries to Poland and Bulgaria. The company says it has “contingency plans and operational scenarios” in place to deal with any potential gas supply disruptions.
Sulphur: Recently-announced Middle East prices for May have increased month-onmonth. The Qatar Sulphur Price (QSP) for May increased by $30/t, while KPC lifted its May pricing by $35/t. Spot sales to China (Indian and Canadian origin) were concluded at around $500/t cfr, with expectations of $520/t cfr going forward for May cargoes loading from the Middle East.
Key market drivers: Announced Middle East monthly prices for May at $460/t f.o.b. Qatar and $470/t f.o.b. Kuwait.
OUTLOOK
Urea: The outlook looks weaker with demand mostly waiting in the wings. Supply should be more than sufficient to meet whatever demand does arise.
Ammonia: Fundamentals suggest that markets west of Suez will soon realign with those in the east. The market remains exposed to volatility in European gas pricing.
Phosphates: Significant demand is still expected from Brazil and south Asia in the coming months. The key question is when will importers start buying. Potential suppliers to India, for example, still face a break-even dilemma, with importers restricted by margins. Softness west of Suez is expected to end in the second half of May, as the return of buyers should prompt a price rebound.
Potash: Most major markets have plateaued – having already factored-in a drastic reduction in Belarusian and Russian MOP availability – while they await clarity on availability in the year’s second half. An increase in MOP vessels leaving Russia will calm the markets and slow down price increases. While, conversely, a continued shortage of Russian and Belarusian MOP will push prices up into the second half.
NPKs: The market’s bearish undertone is continuing as urea and phosphate prices weaken. Demand is nonetheless set to outweigh supply in the near term, helping to maintain and push up prices, with India expected to show the strongest demand in coming weeks.
Sulphur: Pricing continues to firm. The Indian DAP subsidy announcement, and an expectation that Chinese fertilizer export restrictions will be eased at some point, are fuelling the bullish sentiment. While lower-cost FSU tonnages are expected to be offered to the Chinese market, these have yet to make an impact on cfr conclusions, mainly because a supply chain has yet to be established and a long delivery period is anticipated. There is, however, an expectation that FSU availability will eventually weigh on premium price levels and ease the tightness in the market overall.
