FERTILIZER MARKET REPORT September 23, 2022

Are we on the cusp of Russian tap opening?

As we wrote in March, we continue to believe that “Europe seeking supply elsewhere will ultimately continue to tighten markets and support global nitrogen prices.”

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India

RCF released the prices offered in its Sept. 9 urea tender. The lowest prices for East Coast and West Coast deliveries came from OQ Trading at USD$675.25/mt CFR and USD$668.15/mt CFR, respectively. The price was USD$148-$158/mt higher than the previous tender. The price was lower than many had expected, but not so low that RCF was limited to the OQ tons. Still, the buyer was looking to buy 1 million mt of urea in this tender, but was only able to get commitments for 874,000-879,000 mt. Sources now expect the Department of Fertilizer to move quickly to authorize purchasing the 874,000-879,000 mt. The failure to get 1 million mt, said one trader, will mean India is behind in its urea purchase for the rest of the year. Even with the respectable take in this tender, there is a danger that Indian buyers could repeat the series of panic buying that took place two years ago. For now, sources expect the Department of Fertilizer to hold off authorizing another tender for at least a month. Sources said the next tender will be more expensive than this one. The country still needs a bit more than 3 million mt to close out its application year. As long as China maintains its export restrictions, major buyers such as India will have to look to the Arab Gulf and Russia for large shipments. Buying from Russia could soon be easier. Bloomberg reported that the State Bank of India is opening special rupee accounts to handle Russian-related trade. There has long been talk of setting up a larger version of the rupee-ruble exchange program that the two countries have had for some time. The establishment of the special accounts will help shield traders from any repercussions from Western sanctions. Even though the US has said it would not begin sanction proceedings against any bank or insurance company backing the purchase or shipment of Russian fertilizer, some European sanctions are not as generous. At the same time, many in the international financial community remain wary about initiating a deal, only to find that the rules might change at the last minute.

Commentary from Argus

The outlook for ammonia is a little bit softer as the length in the market in the East pushed the market down. There is still underlying strong demand from Europe because of the production outages across the continent. Of interest this week is news of Trammo and the UN working together to resume ammonia shipments from Ukraine. The overall outlook is volatile as spot demand continues against the backdrop of high feedstock costs.

In urea, the news is all about the Indian tender. There was little price movement this week but the tender seems to have created a price floor at least in the near term. Brazil remains a key point of weakness. The outlook is for steady buying in Europe and the promise of renewed demand in the US, India and Australia in 4Q and therefore we expect a largely bullish market going into 4Q.

In phosphates the story is about India but for different reasons. Liquidity has dried up. India DAP prices are under pressure. Pakistan is offline due to floods. Chinese prices also slipped. The Australian import has begun so that is good news for producers. MAP prices in Brazil also slid during the week. The overall outlook is soft.

North America Urea Last Two Years

According to Green Markets, last week, NOLA granular urea barge prices early in the week were reported in the USD$640-$650/st range, but product traded as high as USD$687/st FOB by the end of the week. The week-ago range was USD$630-$680/st FOB. While the average for the week saw a slight uptick, sources said the news of higher prices in the Indian tender were already baked into NOLA thinking.

Last week, Urea pricing in Western Canada was flat for the second week in a row at C$1130-$1150/mt.

Earlier this week, NOLA urea barges were generally put around the USD$650/st FOB mark early in the week, in the middle of the week-ago range of USD$630-$680/st FOB. With new import vessels reported in soon, sources say prices could go either way. Sources said higher urea prices into India were already baked into NOLA price ideas.

North America Phosphate Last Two Weeks

According to Green Markets, last week, NOLA barge players noted firming values on the NOLA MAP barge market, while DAP barges were seen softening from week-ago levels. Pricing on MAP was reported lifting to a fresh USD$790/st FOB high, above the prior USD$785/st FOB top, while trades were heard bottoming at the market’s previously-reported USD$780/st FOB floor. A rumored USD$778/st FOB barge offered on Sept. 12 was not confirmed on Sept. 15. The week’s DAP high was unmoved from the top of the prior-week range at USD$765/st FOB, while low reportedly fell to a USD$755/st FOB floor on trades and offers of imported material during the week. Domestically produced MAP and DAP offers continued to be reported at USD$785/st FOB and USD$765/st FOB, respectively. NOLA DAP barges softened to the USD$755-$765/st FOB range for the trading week, down from USD$760-$765/st FOB at last report. MAP barges loading from NOLA were quoted at USD$780-$790/st FOB, above the prior week’s USD$780-$785/st FOB range.

Last week, MAP was pegged in a tighter range of C$1220-$1235 vs the previous week’s wide range at C$1,220-$1,280/mt FOB in Western Canada.

Early this week, NOLA DAP and MAP barges were reported to be trading at the top end of the prior week’s ranges, which were USD$760-$765/st FOB and USD$780-$785/st FOB, respectively.