Fertilizer International 510 Sept-Oct 2022
30 September 2022
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: Amid thin demand in key regions, most markets saw consecutive weekly price falls in mid-August. Middle East prices dropped sharply as producers cut prices to clear remaining August and early September cargoes – with three trades confirmed at $550556/t f.o.b. Similar mid-August price levels were seen in southeast Asia with deals at $540-557/t f.o.b. Brunei and Indonesia.
Some pockets of activity bucked the softening trend. Prices for granular urea delivered to Myanmar, for example, rose by around $30/t, while Iran’s f.o.b. prices – in a series of deals at $500/t f.o.b. – climbed by $20/t from last business. The market remains soft overall, however, with low demand in Europe, Brazil, the US and southeast Asia.
Key market drivers: Europe’s natural gas crisis has seen feedstock costs for LNGdependent nitrogen plants pushed to new highs in mid-August, prompting fresh speculation about more European plant shutdowns.
Ammonia: The recent narrow range of prices reflects a market where increasing global supply options are being counterbalanced by the European gas crisis. The greater supply options for September, by creating competition for sellers trying to place cargoes into Europe, are now putting a slight downward pressure on spot prices.
Where possible, European buyers are covering their positions far in advance, while other large buying-regions previously dependent on Black Sea exports appear to be covered with new supply contracts. There is a growing disconnect between Asian markets and those in the west, with buyers in the east looking to distance themselves from Europe’s inflated pricing. Although supply is outstripping demand for now, baseline cost estimates for European production are currently above $2,500/t. Yet global supply options continue to provide cargoes at around half this cost. Therefore, at this cost level, it remains uncertain whether European producers can continue with their current production strategies into the four-quarter.
Key market drivers: OCP has bought its first cargoes from the 1,000 t/day Salalah ammonia plant, which will load its first commercial exports this month. OCP has bought 15,000 tonnes from Oman’s OQ Trading for loading in late-August, with another 25,000 tonnes for September-loading on an f.o.b. basis. In Europe, the month-ahead Dutch TTF contract for gas recently closed at a new high of more than $70/mn Btu.
Phosphates: Globally, prices continued to edge downwards in mid-August, with both a seasonal and a price-related dearth of demand affecting sentiment in all markets. Buyers are either waiting for further price falls, not committing to quantities, or buying the bare minimum. India was the exception, although its DAP import prices still eroded. Several new DAP sales to India totalled 160,000 tonnes for August- and September-loading. Prices nevertheless softened to $880-895/t cfr, down $10/t at the low end. Further sales will be required ahead of peak rabi demand.
Chinese DAP prices softened on a sale to the Philippines at $900/t cfr, eroding netbacks to $860-865/t f.o.b. – down from $865-900/t f.o.b. earlier in August. Brazil’s MAP market has remained inactive, causing prices there to slide once again.
Key market drivers: Europe’s natural-gas supply crunch is set to hit the ammonia supply chain. Sulphur prices, meanwhile, remained broadly stable after their drop of almost $300/t last month.
Potash: Bearish sentiment and weak demand in key markets continues to exert a downwards pressure on prices. Granular MOP markets are particularly weak, with prices in Brazil sliding further in mid-August to $850900/t cfr, down from $880-920/t cfr earlier in the month. The granular MOP price in Thailand/Vietnam, meanwhile, dropped to $900950/t cfr. Standard MOP prices in southeast Asia are also under pressure amid lacklustre demand. In contrast, a lack of Russian and Belarusian product in Europe is helping to support current price levels in the region.
Key market drivers: Negotiations for fourth-quarter sales to southeast Asia are likely to begin next month, and should provide more clarity on pricing in the region. Discussions with European buyers on fourth-quarter sales of standard MOP will also start in September. The presence of Belarusian product in southeast Asia is growing, with another cargo of Belarusian granular MOP reported to be arriving in Thailand in August/September.
NPKs: There was widespread quietness across the global market in mid-August. The few prices changes that did occur mostly moved in a downwards direction. In Africa, offers against Malawian tenders remain under evaluation. Participants are also awaiting news of awards following the Zambian government’s request for more than 100,000 tonnes of 10-20-10+S.
Key market drivers: Gas prices in Europe have risen to fresh highs well above the previous peak in early March. The earlier spike was dramatic and followed by steep price decreases, whereas the current climb has been far more gradual. Although Thailand’s high-season demand has picked up, floods in the country’s north and limits on farmers’ purchasing power have kept domestic fertilizer demand below that of previous years.
Sulphur: The sulphur market has begun to stabilise following the large descent in prices from the highs of June and July. The large price drop has sparked some buying interest, despite concerns over phosphate market demand, with large-scale buyers purchasing product at the new lower numbers. Speculative firmer price numbers were circulating in mid-August as a result of renewed confidence among smaller traders. There is some expectation of limited price firming, due to reduced supply from the FSU, and the gap between sulphur pricing and phosphate pricing. This has led some product holders to hold off from lower-priced sales for now. Certainly, buyer confidence is returning, although any bounce-back in prices may not be substantial or sustained if phosphate market weakness persists.
Key market drivers: Bids for the Qatar spot sales tender ranging from mid-$70s to mid-$90s/t f.o.b. The Iran tender is also attracting bids in the low-mid-$70s/t f.o.b.
OUTLOOK
Urea: Supply-side fundamentals remain extremely supportive, despite the current period of demand-driven weakness. Another rally is considered likely, as importers in most markets are behind on purchases and waiting for the market to stabilise before firming up commitments.
Ammonia: The market finds itself in a period of poor liquidity, and is exposed to further fourth-quarter uncertainty because of the European energy crisis.
Phosphates: Sentiment in most markets is weak. Brazilian MAP import demand is absent, as the country’s warehouses are already filled ahead of upcoming safra season applications. The return to the market of importers in India and Pakistan next month could stabilise DAP prices, given the significant tonnages needed by both these markets. Support for Nola barge prices is also expected from a pick up in US buying.
Potash: Expectations of continued low liquidity for the next month will keep prices steady to soft. High inventories will hamper demand in key markets and place pressure on suppliers.
NPKs: A further softening in the phosphates and potash markets will prevent NPK prices from rising. But high energy costs, and low production levels in Europe and China, should ensure that any price decreases, if forthcoming, are not dramatic.
Sulphur: Current lower pricing levels are expected to translate into reduced product availability from FSU supply sources. However, any loss of supply is expected to be exceeded by a fall in sulphur demand, as fertilizer end-users curb their output in an attempt to support the phosphate market price. These market dynamics are expected to limit any price recovery in the near-term. Large phosphate producers have curbed their operating rates and production in recent weeks – a situation that is likely to continue in the short term.
