Fertilizer International 512 Jan-Feb 2023
31 January 2023
Market Insight
Market Insight
Market Insight courtesy of Argus Media
PRICE TRENDS
Urea: The market remained weak at the start of the year with urea prices falling as producers fought for liquidity. Egyptian product fell by $40/t to $495/t f.o.b. in a matter of days, while f.o.b. prices in the Middle East and southeast Asia similarly fell to around $440/t. Urea prices in many end-user markets also slumped: US prices fell over the course of the first week of January by $30/t, Brazil by $15/t and many European markets by around $20/t.
With India out of the market currently, there is a clear urea supply overhang for January-loading cargoes. This applies to Russia, the Middle East and both north and west Africa.
Key market drivers: The removal of import duties saw the resumption of cargoes to European markets from the Middle East, southeast Asia and the US in early January. This forced north African producers to cut prices to stay competitive. India’s decision to delay its next purchase tender until end-January has left many producers looking for sales in other markets, depressing prices across the globe.
Ammonia: With supply options continuing to outweigh demand in most regions, the start of January saw another week of price losses. Prices have now been falling steadily for the past twelve weeks. This has been the consequence of the market rebalancing itself with the ending of the European production curtailments that have been in place for much of 2022. Many European ammonia production plants are scheduled to ramp-up in January due to favourable economics. Steady gas price falls over the past few weeks have now put their production costs firmly below current import price levels.
Key market drivers: Weaker sentiment was illustrated by Yara settling the Tampa contract price with Mosaic at $975/t cfr for January – a $55/t fall from December and the lowest price since July 2022. European natural gas prices also fell sharply again in early January. TTF month-ahead prices dropped to $20/mn Btu on 4th January – their lowest level for nearly a year. The TTF price in mid-January ($22/mn Btu) translates to an approximate ammonia production cost of around $830-840/t. Saudi Arabia’s export availability also looks set to be lower in January.
Phosphates: Major markets east and west of Suez continued to converge as January began. MAP rose to $645-650/t cfr Brazil, for example, while Indian DAP prices slipped to $688-695/t cfr. DAP prices out of China similarly fell to $685-690/t f.o.b. However, there is no clarity currently on phosphate export quotas from China for the first half of 2023.
The Pakistan market remains well stocked with little if any interest in purchases at current price levels. In Europe, meanwhile, DAP price levels remain broadly stable.
In Brazil, MAP prices climbed to $645650/t cfr in the first week of January. A supplier sold 5,000 tonnes of Russian MAP at $645/t cfr for February loading. Non-Russian MAP offers were at $680690/t cfr and even above.
Key market drivers: Settlement of the January Tampa ammonia contract price at $975/t cfr. European gas prices were also lower with front-month natural gas futures of around e65-70/MWh in mid-January.
Potash: Granular MOP prices in Brazil have rebounded following a sustained period of falling prices in the second half of 2022. These rose by $5/t during early January to $525-540/t cfr as trade continues to gain momentum. East of Suez, the outcome of Pupuk Indonesia’s standard MOP buying tender is being closely watched. Having received offers between $560-620/t cfr, Pupuk countered at $500/t cfr. Awards for this tender will help set a new price benchmark for the region.
Key market drivers: The Chinese government removed a one percent import tariff on MOP and SOP on 1st January. This move reduces purchase costs for importers. It also signals that Chinese authorities are now seeking to secure an ample and affordable supply of potash for its domestic market. Shipping through the Black Sea will no longer be insured against the Russia-Ukraine conflict, after protection and indemnity (P&I) clubs cancelled Black Sea war risk coverage at the start of January. This may affect Black Sea potash vessel shipments including those from Belaruskali.
NPKs: Trade of Russian complex fertilizers to India continued as 2022 ended. Russian 16-16-16 and 10-26-26 NPK grades were both sold in large volumes at prices that underlined the softening of the global NPK market. Elsewhere, prices mainly held steady in the absence of market activity. This was due to continued low demand in Southeast Asia, as well as the ongoing holiday season in Europe and the Americas.
Key market drivers: Borealis has completed the sale of Belgium-headquartered NPK producer Rosier to Turkey’s Yildirim Group. The Austrian firm also expects to finalise the sale of its nitrogen business to Czech-owned Agrofert during 2023’s first quarter. Urea prices have also fallen in an oversupplied environment.
Sulphur: 2023 kicked off on a softer note. Chinese demand in January was subdued and sulphur market fundamentals were generally weaker compared to a year ago. The downwards price correction seen in December is keeping product moving. First quarter contracts are also beginning to conclude. Although prices are up on fourth quarter contract agreements, they are below the top levels reached by the spot market during the last quarter. January spot demand was subdued, due to the ongoing contract negotiations, showing a sluggish start after the recent holiday period. In the Mediterranean, the generally softer market trend is being exacerbated by the release of lower priced Russian sulphur exports. This is adding to availability and reducing price ideas.
Key market drivers: First quarter contract agreements are starting to be settled. Lower offers have been made to China with some shipments already concluded. Demand is sluggish with many traders having placed tonnes for January ahead of time.
OUTLOOK
Urea: The sentiment among both importers and traders is that a floor in the urea price is still some distance away. This is exacerbating market softness. Breakeven production costs, which are still well below the latest trades, are offering little price support. Demand will rise across much of the northern hemisphere later in the first quarter, although whether this will be enough to return prices to current levels remains to be seen.
Ammonia: A downwards market correction is expected throughout the rest of the first quarter. The emergence of a clearer picture on seasonal fertilizer demand in Europe could, however, slow and stabilise downward price movements.
Phosphates: Affordability remains solid with continued buying west of Suez expected to lift prices further. Demand from Brazil, the US and Europe is set to ramp up from February onwards.
Potash: Steady demand in Brazil and the emergence of spring interest in Europe should help keep pricing stable. Prices are likely to be steady in Asia until new benchmark prices appear. These will be set by the India contract price or the latest Indonesian buying tender. SOP values, meanwhile, are likely to fall further as they play catch up with falling MOP prices.
NPKs: Price downturns lie ahead for most complex fertilizers. This correction is linked to further significant falls expected in the nitrogen market and the softer outlook for ammonia. Potash pricing, in contrast, has steadied. Demand for NPKs should play a significant role in phosphate pricing, given that price direction in that market has been split.
Sulphur: Softer pricing is expected in the short term. Demand will slow while Chinese buyers and those in associated markets celebrate the lunar new year. This will leave traders looking to place uncommitted cargoes. Prices should rebound from February, given the depressed level of sulphur pricing relative to fertilizer prices.
