Price Trends

Market Insight courtesy of Argus Media

NITROGEN

Falling gas prices in Europe from the start of September offered some relief to markets that had been badly hit by the record gas price levels seen across the continent as Russian pipeline supplies were progressively shut down or, in the case of the Nordstream 1 line, deliberately sabotaged. Dutch TTF gas prices dropped from over 270 euros/MWh ($80/MMBtu) at the start of September to below e100/MWh ($30/ MMBtu) at the end of October – still high by historical standards but their lowest level since July. European gas storage levels were reportedly around 90% at the end of October, with mild weather helping keep demand down.

The fall in gas prices in turn helped ease pressure on European fertilizer producers. Higher prices had already led to dips in demand, with European fertilizer buying down around 20% year on year, though mainly in phosphorus and potash which are less critical for yearly application than nitrogen. At the same time, the relaxation in gas prices has led to capacity restarting. It is estimated that at the start of October only 37% of European fertilizer capacity was operational, but this had risen to 63% by the end of the month.

However, at time of writing this still had yet to filter into ammonia and urea prices. European c.fr ammonia import prices remained at almost $1,200/t at the end of October, with Caribbean f.o.b. rates still above $1,000/t and Middle East offered prices above $900/t. High ammonia prices were causing demand destruction across the board. Deliveries to industrial consumers in northeast Asia were reported to be down 55% year on year for the period 1Q-3Q 2022.

Urea prices, meanwhile, had fallen some way, but remained high, with Middle East f.o.b. prices ranging from $550-600/t and Caribbean prices in a similar range, and these high prices continue to weigh on buying, with Brazilian consumers notably seeming to hold off on purchases.

Another factor weighing on urea markets has been a resumption of exports from China, with an apparent easing of the customs restrictions imposed last year – in practice if not necessarily officially. China exported more than 850,000 tonnes of urea in 3Q 2022, more than double the rates for 1Q and 2Q this year, though still considerably down on 2021’s figures, with most of the cargoes destined for India.

As usual, Indian urea buying continues to set the tone for the market. RCF bought 870,000 tonnes of urea in September, and IPL a further 1.5 million tonnes in October for December delivery at delivered prices of around $650/t c.fr, equivalent to an Arab Gulf netback of around $630/t f.o.b. – most of the urea is coming from Middle East producers.