Fertilizer International 509 Jul-Aug 2022
31 July 2022
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Trading generally slowed at the end of June from the frenetic pace earlier in the month. While steady trade continued in Brazil, with around 200,000 tonnes of granular urea changing hands at $640660/t cfr, activity was more sporadic elsewhere. Southeast Asian markets remain mostly dormant, forcing regional producers to look further afield with sales to Australia and India. The US continues to provide reexport opportunities, as its domestic market seeks to clear inventory after a slow spring, with barge trades having an export cost of around $575-580/t f.o.b. US Gulf.
Key market drivers: Western sanctions are still disrupting Russian export flows and dampening values into certain markets like the US.
Ammonia: a $40/t drop in the Tampa July contract price prompted spot price falls of $25-55/t across key regions at the end of June. The market is witnessing demand destruction in east Asia. Escalating European production costs are, however, limiting price depreciation – and could re-ignite spot demand from European demand hubs in July and August. With the potential for further European production curtailments, the region’s producers are continuing to weigh up import availability. Europe’s buyers have been making inquiries East of Suez, although no sales to markets west of Suez have been confirmed. Middle East producers, to compete with Caribbean delivery prices to northwest Europe, would need to offer cargoes at $900/t f.o.b., and possibly below this, to secure sales into Morocco.
Key market drivers: The Tampa July contract price between Yara and Mosaic fell $40/t to $960/t cfr, the lowest agreement since November 2021 ($825/t cfr). The risk of European shutdowns also continues. Rises in month-ahead TTF gas prices at the end of June (up more than $3/mn Btu on the week to $43.92/mn Btu) equate to ammonia production costs of nearly $1,600/t – more than $500/t higher than today’s delivered price. East Asian spot demand for July, meanwhile, is almost non-existent.
Phosphates: MAP prices in Brazil slipped by as much as $10/t to $1,000-1,020/t cfr at the end of June, with sales of Chinese and Russian material falling within this price range. DAP barges at Nola also fell by $20/st to $780-785/st f.o.b. Prices east of Suez remained stable, buoyed by Bangladesh private-sector awards in late June. The need to satisfy Bangladesh contract commitments are expected to keep Chinese and Jordanian producers busy in coming months.
Elsewhere, Ma’aden sold 25,000 tonnes of DAP to Thailand for July loading. There were no new DAP purchases on the subcontinent, although an Indian buyer did book 25,000 tonnes of Turkish NPS through a trading firm. DAP and MAP prices in Europe were flat and activity was limited to small volumes. West of Suez, traders made DAP sales in Argentina at $1,005-1,010/t cfr.
Key market drivers: Market participants are awaiting a possible change to China’s export policies from July – and assessing their options – although there has been no official confirmation to date.
Potash: Prices were flat at the end of June, reflecting the seasonal lull in key markets. An overall bearish sentiment prevails as the market awaits the return of Brazil. How strong forthcoming Brazilian buying will be is questionable, given that importers purchased heavily earlier this year and stocks remain high. These factors helped push down granular MOP prices in Brazil to $1,000-1,075/t cfr at the end of June.
Key market drivers: Brazilian importers are expected to return to the market later than anticipated and may purchase less than usual. Granular MOP inventories continue to build in the country, with over 500,000 tonnes of product being lined up for port unloading in July, while downstream demand remains lacklustre. New shipments to the US are likely to signal that Russian MOP is becoming more acceptable in the market. Two potash vessels from Russia set sail for the US in late June, the country’s first shipments to North America since the start of the Russia-Ukraine conflict in February.
NPKs: Turkish NPS has been sold to India for the first time. A trader sold a 25,00030,000 tonne lot of Turkish 20-20-0+13S to a buyer in India at around $700/t cfr duty unpaid. In Africa, the Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM) has received offers from four companies for its 110,000 tonne NPK and urea tender which closed in late June. The lowest offers were $879-916/t for three 23-105+6S+1Zn lots. Elsewhere, NPK markets were largely quiet, ensuring steady prices.
Key market drivers: In China, exporters of complex fertilizers have held back from issuing offers due to uncertainties over customs inspections and raw material prices. European gas prices continue to rise. Front-month prices of natural gas on the TTF hub closed at $43.92/mn Btu on 30th June, up from $40.72/mn Btu the previous week. This could prompt European fertilizer producers to cut or halt production.
Sulphur: The market correction of recent weeks provided more clarity on f.o.b. price levels at the end of June. The announced monthly lifting price of $428/t f.o.b. Qatar was $62/t down on June’s peak. This was followed by the Kuwaiti KSP for July being set at $427/t f.o.b. Kuwait – a $63/t fall on the previous month. Cfr offers have followed suit. Brazil has booked tonnes priced at the lower level of $435/t cfr west of Suez, while an offer level of $450/t cfr has failed to attract Chinese buying interest. The spot market remains subdued while contract negotiations continue.
Key market drivers: Middle East monthly announcements for July have fallen by more than $60/t on peak June levels. Initial third-quarter price agreements at $420/t f.o.b. Middle East, although up by $15/t on the previous quarter, are down substantially on peak spot market prices seen in the interim.
OUTLOOK
Urea: While the risk of European shutdowns due to natural gas shortages remains, the urea market is well supplied for now. Large tonnages of urea booked by importers and traders in mid-June have satisfied short-term needs. Producers and importers, being mostly covered for July and into August, are now happy to trade at a slower pace.
Ammonia: Speculation over further production cuts in Europe is firming market sentiment for August. Further tightness is expected as seasonal demand starts to creep back into the market.
Phosphates: Prices west of Suez have begun to stabilise, despite the seasonal lull. Brazil will need to jump back into the market in coming weeks, although plenty of product remains in warehouses. Importers also remain cautious. Russian producers and OCP appear to be holding cfr Brazil levels firm. China is tied up with Bangladesh and its window for shipping product to Brazil for the safra season is practically over. Rumours continue to swirl about the tightening of China’s export policies, a move that would pressure DAP buyers in India and Pakistan.
Potash: All eyes are on the expected return of Brazil and the US to the market in coming weeks. The strength of this demand should prevent further price declines, as well as signalling future price direction. Europe’s summer lull should see prices stay flat, while falling CPO prices in Asia will continue to support bearish sentiment in that region.
NPKs: Limited demand in southeast Asian markets is likely to pressure complex fertilizers prices, as will offers that undercut general market levels. However, the knock-on effect of soaring gas costs in Europe may keep NPK prices steady, despite off-season quietness.
Sulphur: The market is expected to stabilise, following the corrections of recent few weeks, as new price levels for the third quarter become clearer. Further softening in the phosphate market could, however, strengthen the downside on sulphur pricing.
